Dear Neighbor,
Many of you have told me your opinions about tax cut proposals by both governors Charlie Baker and Maura Healey and by the House and Senate. Last Thursday, we voted on a final compromise tax cut plan.
Larry Edelman’s column in the Globe was headlined, “Tax relief has something for everyone to hate.”
But there was more to love, despite serious concerns.
Here are some good parts of the tax cut bill:
Increasing the Earned Income Tax Credit will benefit 400,000 families with incomes less than $60,000 and cost $91 million a year.
Raising the cap on Low Income Housing Tax Credits by $20 million will make possible thousands of affordable housing units.
Raise Up Massachusetts ran the years long campaign to pass the Fair Share Amendment; their top priority was “preventing high-income families from engaging in tax avoidance schemes to limit what they pay under the Fair Share Amendment.” The bill includes Sen. Jason Lewis' amendment requiring married taxpayers who file a joint return with the federal government to file a joint state return. Harris Gruman of Raise Up called this change the most significant piece of the tax relief bill, which could preserve over half a billion dollars a year for schools and transportation.
The largest item, worth up to $307 million by next year, is the increase in the child and dependent tax credit.from $180 to $440. More than 565,000 Massachusetts families would benefit from the most generous universal child and dependent tax credit in the country.
There are many other provisions, including
increasing the rental deduction from $3000 - $4000
doubling the senior circuit breaker
raising the estate tax threshold to $2 million and eliminating the cliff effect
changing in the 62F law that caused the state to return $3 billion to taxpayers last year; the distribution of any future (unlikely) refunds will.be less skewed toward high income people
You can read more here.
Here are the pieces I opposed:
The cut in the short-term capital gains tax rate - though half as much as the House and governor wanted, Massachusetts, like the federal government, currently levies higher tax rates on profits from investments that were held for less than a year than on longer-term investments. This encourages patient, productive investment, rather than speculation. The change from 12% to 8.5% will cost $49 million annually. The Senate, including me, voted not to include it; this reduction is half of what was proposed by the governor and the House.
The adoption of single sales factor for corporate taxes at an annual cost of $79 million. SSF gives some multi-state corporations a break in their taxes by only looking at in-state sales —not payroll or property — to calculate taxes. This was part of the bills by the governors and the House.
Phineas Baxandall of MassBudget' explained why progressives opposed both provisions. The Senate bill didn't include either, though they were in both governors' proposals and the House version.
The bill is a compromise, like most legislation.
Here's a summary of criticisms from right and left.
Dangerous "Consensus"
I believe the Senate bill and the conference committee report were the best possible compromises - given the vocal insistence by Gov. Baker, Gov. Healey, all the powerful business groups, and the Boston Globe that "tax relief" was Massachusetts' most urgent need.
That message directly contradicts the message from voters, who prioritized more revenue and spending for education and transportation by raising taxes on those who benefit most from our economy and can most afford it. They approved the Fair Share amendment, which will provide over $1 billion a year for those needs.
After passage of the compromise, the immediate and unanimous demand from business groups and the Globe was "We want much more!"
As I've written previously, Massachusetts is not an "outlier" on total taxes. We're comparatively high on some taxes, and low on others. We are the highest or among the very highest - and therefore uncompetitive - in housing costs, traffic congestion, child care costs, and elder insecurity. Becoming more competitive in each of these will require more spending and therefore more revenue, not less. Revenue sources must be both adequate and progressive.
Where is the business and media leadership to help change the message?
As always, I welcome your thoughts.
Stay safe and stay in touch,