The last proposal standing between taxpayers and the elimination of the $100 ($200 for joint filers) deduction on interest from savings in Massachusetts banks is an amendment to the state Senate budget filed by Sen. Bruce Tarr (R-Gloucester). The deduction applies only if the interest is earned at a bank with at least one physical branch location in Massachusetts.
The Senate Ways and Means Committee confirmed Tuesday, May 21 to State House News Service that an outside section of the committee’s fiscal year 2025 budget bill repeals the tax exemption and, in doing so, would generate $4 million in new state revenue.
The repeal was included in Governor Maura Healey’s budget and the House budget, according to the Senate Ways and Means Committee, where spokesman Sean Fitzgerald said the proposal does not represent a new tax.
The spokesman did not explain why the panel supports the change. Similarly, Healey’s budget bill filed in January includes a single line explaining that she plans to repeal the tax deduction but doesn’t offer a rationale for the change.
Tarr’s amendment (117) would strike outside section 46 of the Ways and Means budget bill.
“My concern is this is a deduction that could be important to folks. It is not utilized to a tremendous extent right now, but I think when we take away options it’s not a good idea for taxpayers to be able to save some money, particularly with regard to Massachusetts banks. These are banks that we need, and unlike some of the larger, more national and international banks, these are ones that are oftentimes local community anchor. And we want to just make sure that that option continues to be there,” the Senate minority leader told State House News Service late Tuesday afternoon.
The chairman of the Senate Ways and Means Committee, state Senator Michael Rodrigues (D-Westport), who spoke with reporters alongside Tarr, said a bipartisan group recommended that Massachusetts repeal the deduction.
“We have established a bipartisan Tax Expenditure Review Commission that looks at all of our tax expenditures, which are primarily deductions and credits, because oftentimes we put a deduction or credit on the books and it stays there in perpetuity and does not get looked at,” Rodrigues said. “Times change, business models change, and this was one tax expenditure that the TERC commission recommended that we rescind, and it provides about $4 million a year in revenue for the commonwealth.”
Paul Craney of the conservative Massachusetts Fiscal Alliance called the governor’s proposal a “bad policy idea” and said she “should give an explanation for why she’s taking away this benefit to the taxpayers.”
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