A compromise on tax relief

The House and Senate Conference Committee charged with working out differences between the two branches’  tax relief proposals successfully negotiated a compromise bill. The bill is linked here.

Legislators cannot file amendments to bills released from a Conference Committee. We can only vote yes or no. I have reviewed the Conference Committee’s bill and spoken with Senate members of the Conference Committee and I will vote yes on this proposal.

The total impact for fiscal year 2024 will be $561.3 million. In fiscal year 2027, when fully phased in, the total impact will be $1.02 billion.

The main conversation around this bill has been rooted in the question of what will make Massachusetts more competitive as a home for businesses and families. During our budget and tax policy debate, the Senate focused on a definition of competitive that grounded our conversation in equity, economic justice, and opportunity – believing that critical investments in, for example, early childcare and public higher education, coupled with tax relief for those who need it the most, will help drive people and businesses to both want to come to Massachusetts and enable them to remain here, raise families here, and age here. 

There is a great deal about this agreement that will help low income and moderate income individuals and families: 

• The expanded child and dependent tax credit, which will benefit more than 565,000 families, will be the most generous universal child and dependent tax credit in the country.
• The Earned Income Tax Credit increase will provide crucial support to working individuals and families, benefitting nearly 400,000 taxpayers with incomes under $60,000.
• The Senior Circuit Breaker Tax Credit increase will make it easier for approximately 100,000 seniors who struggle with high housing costs to stay in their homes.
• The Rental Deduction change will support approximately 800,000 renters across the Commonwealth.
• This increased authorization cap for the Low Income Housing Tax Credit will provide enough funding to spur the creation of thousands of new units of affordable housing annually while also bolstering economic activity and ancillary market-rate housing.
• There are a number of smaller tax credits that will help residents of small towns, dairy farms, students, seniors, homeowners with lead paint or septic concerns, and renters.
• It closes a Fair Share Amendment loophole which will help the revenue from that new tax remain strong.

The full components of the tax relief bill are as follows:

Child and Dependent Tax Credit

• Increases the tax credit for a dependent child, disabled adult, or senior from $180 to $310 in taxable year 2023, and then to $440 in taxable year 2024 and beyond, per dependent, while eliminating the child/dependent cap.

Estate Tax

• Reduces the estate tax for all taxpayers and eliminates the tax for all estates under $2 million by allowing a uniform credit of $99,600.

Earned Income Tax Credit

• Increases the earned income tax credit from 30% to 40% of the federal credit.

Single Sales Factor

• Moves from a sales tax apportionment system that factors in property, payroll, and sales to an apportionment that only considers sales, thereby removing a disincentive for Massachusetts companies to hire or grow in-state and making it more attractive for companies to headquarter in Massachusetts.

Senior Circuit Breaker Tax Credit

• Doubles the maximum senior circuit breaker credit from $1,200 to $2,400.

Rental Deduction

• Increases the cap on the rental deduction from $3,000 to $4,000.

Short Term Capital Gains

• Reduces the tax rate on short-term capital gains from 12% to 8.5%.

Housing Development Incentive Program (HDIP)

• Increases the statewide cap from $10M to $57M one-time, and then to $30M annually.

Low Income Housing Tax Credit

• Raises the annual authorization from $40M to $60M.

Local Option Property Tax Exemption for Affordable Housing

• Permits municipalities to adopt a local property tax exemption for affordable real estate that is rented by a person whose income is less than a certain income level set by the community.

Title V Cesspool or Septic System Tax Credit

• Triples the maximum credit available from $6,000 to $18,000 and increases the amount claimable to $4,000 per year, easing the burden on homeowners facing the high cost of septic tank replacement or repair.

Additional Tax Changes

• Lead Paint Abatement: Doubles the credit to $3,000 for full abatement and $1,000 for partial abatement, to support families with older homes.
• Dairy Tax Credit: Increases the statewide cap from $6M to $8M, to provide more assistance for local farmers during downturns in milk prices.
• Student Loan Repayment Exemption: Ensures that employer student loan payments are not treated as taxable compensation.
• Commuter Transit Benefits: Makes public transit fares, as well as ferry and regional transit passes and bike commuter expenses, eligible for the commuter expense tax deduction.
• Apprenticeship Tax Credit Reforms: Expands the occupations for which this workforce development credit is available.
• Cider Tax: Raises the maximum amount of alcohol for these classes of drinks to 8½%, allowing more locally produced hard cider and still wines to be taxed at a lower rate.
• Senior Property Tax Volunteer Program: Increases from $1,500 to $2,000 the maximum that municipalities may allow for certain seniors to reduce from their property tax by participating in the senior work-off program.

Policy Highlights

• Requires payments made if Chapter 62F is triggered to be paid out equally amongst taxpayers.
• Requires married taxpayers who file a joint return with the federal government to file a joint state return, subject to exemptions or adjustments promulgated by the Department of Revenue.