Governor Maura Healey and Lieutenant Governor Kimberley Driscoll released a $742 million tax relief package to the Commonwealth on Feb. 27. The package is the most recent iteration in an effort by Healey to make living in Massachusetts more affordable for all.
The new package will be implemented for Fiscal Year 2024, which will begin on April 1, 2023. Healey’s Child and Family Tax Credit, reforms of the short-term capital gains and estate taxes and an increase in rent deduction are highlights of the new measure.
Healey said the tax decisions were made for families, college graduates, seniors and more, expressing that it is a response aimed at decreasing the day-to-day struggles of residents.
“We’re filing this tax relief package for each of them,” Healey said in the statement released by her office. “This proposal centers affordability, competitiveness and equity each step of the way, delivering relief to those who need it most and making reforms that will attract and retain more businesses and residents to our great state.”
Driscoll noted the economic repercussions that come with having an unaffordable state, one that was one of the “most moved from” last year, according to CBS News.
“If people can’t afford to live and work here, we’re not going to be able to maintain our economic edge,” Driscoll said in the press release. “Our tax relief package will put more money back in the pockets of those who need it most while also making key reforms in areas where we are an outlier among other states.”
Healey’s Child and Family Tax Benefit will provide families $600 credit per their dependents. Children under 13, people with disabilities and senior dependents age 65 and older are all considered as dependents.
“That’s real money for ordinary people,” said Phineas Baxandall, the policy director at Massachusetts Budget and Policy Center. “It’s a really well-done policy.”
However, Baxandall said other aspects of the package will be less helpful to the majority of Massachusetts residents. He highlighted the cuts to the estate tax and short-term capital gains taxes as reforms that will only benefit high-income residents.
“It seems like on one hand, there’s these tax changes which are very well targeted to where it’s most needed,” Baxandall said. “On the other hand, there’s some quite large tax benefits which seem to be targeted where they’re needed the least.”
The package proposes a reduction of the short-term capital gains tax from 12% to 5% and an elimination of the estate tax for all estates valued up to $3 million with a credit of up to $182,000. Massachusetts has been a major outlier in regard to the estate tax, being one of 12 states that still have one with the lowest exemption in the nation, tied with Oregon.
Christopher Carlozzi, the state director of the National Federation of Independent Business, said the estate tax reform is meaningful for small businesses.
“It makes Massachusetts a little more competitive. I’m not going to say that it’s the solution for everything, it’s an incremental step,” Carlozzi said. “We would certainly like to see the tax go away, like the majority of states … but I think it is a step in the right direction and something that businesses can celebrate.”
Carlozzi said this measure should be seen as just a step, and there are other types of tax reforms that should take place going forward.
“We shouldn’t stop here with tax reform,” Carlozzi said. “We should look at things like our income tax, we should look at our sales tax, and really start to examine how we can be more competitive.”
Another aspect of the package is the doubling of the Senior Circuit Breaker Credit from $1,200 to $2,400, a benefit that would help low-income seniors stay in their homes.
“[This is] important to help older adults and their families achieve financial security and facilitate their ability to age in their own homes and communities,” Elizabeth Connell, the executive director for the Massachusetts Councils on Aging, said. “This is a big thing for older adults, so we’re very, very excited about it.”
In recent years, Massachusetts has been among the worst states in the nation for elder economic security, according to a 2019 study by University of Massachusetts, Boston. Connell said especially after the pandemic, older adults bore the brunt of its effects by being most at risk of illness.
“Many of your older adults in various communities are the fabric that underlies that network in that community, because they’ve been there,” Connell said. “Passing these measures will really help many seniors to remain in their homes and maintain those essential, lifelong connections they built in their communities.”
James Repetti, a professor at Boston College Law School specializing in tax laws, said that overall he thinks the new package is beneficial.
“I think that [Healey] has really done a great job … threading the needle between trying to ensure that we have revenue that can fund our social programs, and at the same time trying to make the state more attractive to potential employers,” Repetti said.
Baxandall said budgets are important particularly in a state where voters have called on lawmakers to make them more equal.
“Politicians can talk a lot … but budgets are where they express the real weight of their choices,” Baxandall said.