Massachusetts House Sends $1.1 Billion Tax Relief Bill To Senate

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By Chris Lisinski
State House News Service

The full House couldn’t find a single thing they wanted to change in a nearly $1.1 billion tax relief bill on Thursday, instead lining up behind the exact proposal that Massachusetts House Democrats pushed through a committee two days earlier.

Representatives overwhelmingly approved the package (H.3770), voting 150-3 to combine relief for parents, caregivers, renters, and senior citizens with business-friendly changes to the short-term capital gains tax and estate tax designed to bring those laws more in line with other states.

Democrat state representatives Mike Connolly of Cambridge, Danillo Sena of Acton, and Erika Uyterhoeven of Somerville cast the only votes against the bill. Connolly said the measure contains too many breaks aimed at wealthy Bay Staters but withdrew his amendments without seeking votes.

The House rejected a pair of amendments filed by Minority Leader Brad Jones (R-North Reading), and 24 other proposed changes were all withdrawn without their sponsors seeking recorded votes, or even voice votes. Amendments are often withdrawn when sponsors feel they don’t have the votes to prevail.

The House’s Democratic majority made clear Thursday, April 13 that it wants to change a 1986 tax cap law enacted by voters, which last year triggered nearly $3 billion in rebates, and to give the state greater bandwidth to stockpile more money in long-term savings.

Speaker Ron Mariano’s team rolled out the bill on Tuesday, reviving a push they abandoned last year to reduce the tax burden on Bay Staters across the income spectrum and to make Massachusetts a more appealing environment for employers and higher earners.

“We have been focused on how we can help the people of the commonwealth with the cost of living and make life a little easier, and we do so in this legislation,” said state Representative Mark Cusack (D-Braintree), co-chairman of the state legislature’s Joint Committee on Revenue. “We have also focused on our economic competitiveness, and where we can lower and remove our outlier status to make Massachusetts a better place to live, work, and invest, and we do that in this package as well.”

The legislation would launch a new $600-per-dependent tax credit for families and caregivers, expand breaks for renters, seniors, and low-income families, increase the estate tax threshold from $1 million to $2 million while eliminating the “cliff effect,” slash the short-term capital gains tax rate from 12 percent to 5 percent over two years, and shift to a single sales factor apportionment system for certain businesses.

The lack of changes made during Thursday’s debate ensures the bill heads to the Senate in the exact form House leaders envisioned when they crafted their $56.2 billion fiscal year 2024 budget.

That spending plan, rolled out Wednesday, April 12 in between the introduction and passage of their tax proposal, factors in a $587 million impact from the tax code changes. House Democrats project that once fully phased in, the tax relief will rise to $1.1 billion per year.

The tax policy debate will now shift now to the Senate, whose Democrat leaders have said they are interested in “progressive, permanent tax reform” without outlining many details.


Changes To Mandatory Tax Relief Emerges As Flashpoints

Representatives were only asked to vote on two out of 26 amendments, both filed by the chamber’s top Republican.

One of those amendments would have spiked a section of the bill that alters the way mandatory tax relief must be paid under the tax cap known as Chapter 62F.

When the state’s remarkable tax collections triggered the law last year for the first time since 1987, Beacon Hill paid back the rebates on a proportional basis. Each eligible taxpayer received a refund worth about 13 percent of what they paid Massachusetts in personal income tax in 2021, which means the state’s wealthiest residents got thousands of dollars back and many lower-income Bay Staters received less than $100.

The bill House Democrats crafted would keep Chapter 62F in place but require the rebates to be divided evenly among all eligible taxpayers. Cusack said that would ensure “everyone in the commonwealth will share equally in our economic success.”

But Jones and other Republicans took to the microphone to argue that the legislative maneuver would disrespect the will of Massachusetts voters who approved the tax cap law via a 1986 ballot question.

“We’ve heard a lot from people talking about Fair Share [the millionaires income surtax] — the voters who just approved that, we need to do this, we need to do that, we need to respect the voters. But why don’t we need to respect the voters who passed this law?” Jones said. “The fact of the matter is, it’s only been triggered twice since it was passed in 1986. That speaks to how judiciously it was crafted and drawn and passed.”

State Representative Sarah Peake (D-Provincetown), a second assistant majority leader in Mariano’s leadership team, said the Legislature has the right to change voter-enacted laws.

“This is a representative democracy, not a direct democracy,” Peake said. “Yes, there are some ballot initiatives, things that go on the ballot that come to us, and [as] often as not, we make tweaks to those ballot initiatives and change them after they are voted on by the people to make them better legislation. What recently comes to mind is the legislation and the ballot initiative that legalized the sale of cannabis in the commonwealth of Massachusetts. What appeared on the ballot is not what appears in our statute books today, so this isn’t some outlier. This is the common practice.”

The House rejected Jones’s push to leave Chapter 62F untouched by a 26-128 vote. Democrat state representatives Colleen Garry of Dracut and Jeffrey Turco of Winthrop joined Republicans in support, and independent state Representative Susannah Whipps of Athol voted alongside Democrats opposing the measure.

Massachusetts Republican Party chairman Amy Carnevale slammed the new 62F plan in the House bill as changing the law “from a refund into a government handout.”

“Instead of taxpayers getting a percentage based on what they paid to the state, the Democrats want to send just a flat rate check to everyone. It is a redistribution of wealth,” Carnevale wrote in an email message to supporters after the vote. “It is not fair. Your refund should be based on what you pay!”

State representatives rejected another Jones amendment that would have left untouched a cap on how much money state government can deposit into its “rainy day” stabilization fund before triggering mandatory tax relief.

Existing law limits the amount that can remain in the account at the end of a fiscal year to “15 per cent of the budgeted revenues and other financial resources pertaining to the budgeted funds.” Any overages go to a Tax Reduction Fund, which provides relief through one-time personal exemption increases.

The House bill would push that threshold to 25.5 percent, allowing policymakers to dump more unspent dollars into savings before triggering tax relief.

Jones said the change would make it “less likely that when we achieve extraordinary success and practice extraordinary financial responsibility that taxpayers of the commonwealth are going to get a modest tax break.”

The amendment failed 25-129, with Garry voting yes and Whipps voting no.

Democrats are pushing to raise the cap as the state inches closer to crossing the line. At the end of fiscal year 2022 (which was June 30, 2022), the long-term savings account balance of $6.938 billion was about 75 percent of the way to that year’s limit. House leaders projected during their budget rollout this week that the rainy day fund will surpass $9.04 billion by the end of fiscal year 2024 (which is June 30, 2024), easily its highest level in history.

During Thursday’s debate, Cusack said lawmakers previously raised the cap from 7.5 percent to 10 percent in 2001, then again from 10 percent to 15 percent in 2004. He recounted spending cuts Beacon Hill implemented amid past recessions, arguing that the ability to save more money ensures that “when it does rain, we do not have to cut our services that we’re making historic investments in.”


No Revenue Committee Report, No Problem

Connolly, a Cambridge progressive who stands to the left of the House’s leadership hierarchy, filed several amendments, including a push for a smaller short-term capital gains tax rate cut and establishment of a tiered corporate minimum tax.

At the end of a nearly 14-minute speech railing against “parts of the bill that overwhelmingly benefit big corporations and the very wealthy,” Connolly said he would withdraw all of his amendments without seeking any votes.

The Progressive Massachusetts group zeroed in on the estate tax, short-term capital gains tax, and single sales factor apportionment reforms collectively worth about $440 million as pressure points. During its lobby day earlier on Thursday, the organization slammed those measures as “regressive” and likely to blunt the impact of a newly voter-enacted surtax on high earners.

“Think of all that we could do with $440 million if instead we invested it in our public transit systems, in education, in child care, in climate resilience, in affordable housing, or in health care,” the group wrote in a handout from its event. “Indeed, tackling our housing crisis should be the #1 priority if legislators actually cared about the goals of ‘affordability’ and ‘competitiveness.’ ”

Republicans also took aim at the process by which House Democrats muscled the bill onto the floor.

The House Ways and Means Committee appended all of the tax relief proposals to the shell of an emergency spending bill Governor Maura Healey filed in January (H 47), almost all of which already became law.

The committee voted Tuesday, April 11 to advance the measure. Twenty-four representatives supported the Ways and Means Committee bill and eight did not take a position, and House leaders declined to identify how any members voted.

Healey’s nearly $1 billion tax bill (H.42), which overlaps in many ways with the House bill, generated substantial testimony before the Revenue Committee hearing last month, but that panel — which unlike the House Ways and Means Committee also features senators among its ranks — never made a formal recommendation about how to proceed.

“If you think it should be changed, put it through a different process. [There was] really effectively no hearing on it,” Jones said Thursday, April 13 while arguing against the House bill’s tweaks to Chapter 62F. “The bill originates out of a completely different committee than what would be the committee of jurisdiction.”

The House Ways and Means Committee chairman, state Representative Aaron Michlewitz (D-North End), told State House News Service on Wednesday the streamlined approach was because of “timing.”

“We felt it was important to get this bill moved forward before we went through an entire budget process because it may have such an impact on FY24 in terms of what the numbers would be,” Michlewitz said. “We wanted to move it forward in a quick manner, and that’s why we went through the Ways and Means process.”

[Sam Doran contributed reporting.]


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