Yesterday the Senate debated and voted to approve a $590 million tax relief bill. This bill was full of responsible changes to our tax code, focused on providing relief to low and middle-income residents, seniors and renters, while also keeping our economy competitive, so that Massachusetts continues to be an attractive place for people to set up shop, to raise a family, or to move to be closer to loved ones.
I’ve included a full summary of the bill below, but I just want to highlight a couple of provisions I’m particularly pleased about.
Each session I file legislation to increase and expand the Earned Income Tax Credit so I’m very pleased to see the state credit increased in this bill. It’s one of the very best anti-poverty/economic stimulus measures in operation today.
Also the Dairy Farm Tax Credit increase is a big win for our district, our dairy farmers and our local food system. A huge hike in what’s called the Title V Tax Credit is a western Mass win as it will support those who must replace a failed (and expensive) septic system.
With our housing crisis, the increase in the rental deduction will help so many renters, and the increase in the low income housing tax credit will directly result in new affordable housing units in the North Quabbin region, in Hampshire County, in Franklin County, where we really need more affordable housing units.
During debate, we adopted an amendment which I cosponsored (and I heard from many of you in support of) to protect Fair Share amendment revenue by closing a tax loophole for high-income tax filers. A summary of that amendment is included at the very bottom.
Finally, I’m proud of the responsible changes this bill makes to our estate tax. I have heard from many constituents whose family home has appreciated in value and, if they incurred the estate tax, their family may need to sell the home to pay the tax bill. The Senate’s approach recognizes this reality in a way that will help the folks who need the support the most.
The Senate resisted pressure to pass tax changes focused on those who are already doing the best in this economy, such as reducing the short-term capital gains tax rate, and the result is a responsible package of permanent tax relief that will lift up those who are struggling, while ensuring Massachusetts continues to have enough revenue to invest in our many priorities like education, transportation, health care, climate, and so much more.
Read on for a full summary of the bill and the amendment I described above.
– Jo
Summary of S.2397
An Act to improve the Commonwealth’s competitiveness, affordability, and equity
- Increases the Earned Income Tax Credit (EITC), which provides critical support to working families, from 30% to 40% of the federal credit
- Increases the Child and Dependent Tax Credit (CDTC), the amount of the credit from $180 to $310 per child/dependent, and eliminates the current cap of two children/dependents
- Increases the cap on the rental deduction from $3,000 to $4,000
- Doubles the maximum senior circuit breaker credit, which supports elderly residents who struggle with high housing costs, from $1,200 to $2,400
- Excludes homes valued at under $2 million from the Estate Tax and eliminates the “cliff effect” by allowing a uniform credit of $99,600 for all estates
- Increases the statewide cap for the Dairy Tax credit from $6 million to $8 million
- Raises annual authorization of the Low Income Housing Tax Credit, which directly supports the production of affordable housing units across the Commonwealth, from $40 million to $60 million
- Triples the maximum credit under the Title V Tax Credit, which supports those who must replace failed septic systems, from $6,000 to $18,000, and lifts the amount claimable to $4,000 per year
- Expands the types of alcoholic drinks which qualify for a lower tax rate as part of the cider tax
- Doubles the credit for lead paint abatement to $3,000 for full abatement and $1,000 for partial abatement
- Expands eligible occupations for the Apprenticeship Tax Credit
- Increases statewide cap for the Housing Development Incentive Program (HDIP) from $10 million to $57 million on a one-time basis and then to $30 million annually
Notably, this legislation ensures that student loan payment assistance offered by employers will not be treated as taxable compensation. The bill also adds regional transit fares and bike commuter expenses to the allowable commuter expenses eligible for favorable tax status.
To encourage affordable housing, the bill gives municipalities the option of adopting a local property tax exemption for real estate that is rented to a person below a certain area-dependent income level.
Additionally, the bill also directs the following studies:
- A study by the Executive Office of Administration and Finance on the feasibility of making advance quarterly payments of the Child and Dependent Tax Credit
- A study by the Department of Revenue on the efficacy of an additional, elective entity-level tax of up to 4 percent on a portion of qualified taxable income in the Commonwealth, coupled with a refundable credit, for eligible pass-through entities
Finally, here’s a summary of the amendment to protect Fair Share amendment revenue:
Right now, Massachusetts is the only state that has a separate income tax rate for high-income filers without either designating lower tax rate thresholds for single filers than married filers or requiring federal joint filers to file jointly on their state taxes. As a result, under current law, some high-income couples who file jointly at the federal level may be able to avoid up to $40,000/year in Fair Share tax by filing singly at the state level.
Moreover, this loophole, which does not exist in any other state, creates an incentive for illegal misattribution of income between the two members of the couple. Without a change, significant additional state tax audits will be required to limit ‘gaming’ of the state tax system.
The amendment we adopted requires that couples who file jointly at the federal level also file jointly at the state level, as other states do. The amendment provides for limited exemptions to address special circumstances that justify single filing at the state level, such as when one spouse is a non-resident with non-Massachusetts income. Requiring consistent tax filing status would:
- Limit the loss of tax revenue that is needed for new investments in education and transportation
- Ensure Massachusetts aligns with every other state in preventing federal joint filers from avoiding state taxes
- Simplify tax filing for Massachusetts couples, and avoid the need for additional state tax audits
