GOV. CHARLIE BAKER is using tax filing day to publicly urge lawmakers to adopt his $700 million tax break plan – a call House leaders have so far ignored.
“There’s no better time than tax day to talk about why we should be investing in the people in Massachusetts whose hard work has generated an enormous surplus here,” Baker said at a press conference in his State House office, surrounded by supporters of his bill, primarily from the business community.
Baker’s fiscal 2023 budget proposal included tax breaks for seniors, renters, low-income taxpayers, and parents of dependent children. It would modify the estate tax and lower the tax rate on short-term capital gains. The proposal comes as Massachusetts is awash in money from state tax revenues and federal COVID recovery aid.
But the House Ways and Means Committee, in a budget proposal that will be debated by the full House next week, declined to adopt any tax changes. House Ways and Means chair Aaron Michlewitz said House leaders prioritized reinvesting in programs and services, like early childhood education and job training.
The debate is turning into a fundamental disagreement between the Republican governor and the Democratic-led House.
But Baker disagreed with the framing of investments versus tax breaks. “I don’t look at the tax package and say is this the sort of thing we should trade off against this or that,” Baker said. He said the state is in a unique position to be able to support programs and cut taxes.
At Tuesday’s press conference, Baker, Lt. Gov. Karyn Polito, and Administration and Finance Secretary Michael Heffernan argued that revenues are soaring and the state can easily afford to give taxpayers a break at a time when inflation is increasing costs for goods and services and housing prices are rising.
Heffernan said tax collections, as of March, were $3.6 billion above expectations for the fiscal year that ends in June. “We can afford to provide tax relief, and returning surplus tax revenues is the right thing to do to provide relief to hard working taxpayers after two very difficult years,” Heffernan said.
John Regan, president and CEO of Associated Industries of Massachusetts, said similarly, “The state’s awash in money, the people could really use a break.”
Massachusetts Taxpayers Foundation president Eileen McAnneny said the state’s large rainy day fund, combined with soaring tax revenues and federal revenues make this an “appropriate time to provide the people of Massachusetts with much needed tax relief, particularly against the backdrop of inflation.” McAnneny said remote work has made it easier for workers to relocate, so it is more vital that Massachusetts has a tax climate suitable to attracting and retaining talent. She said the estate tax and short-terms capital gains tax are some of the state’s more onerous tax provisions.
Baker wants to tax short-term capital gains at 5 percent, instead of the current 12 percent. He would raise the threshold at which the estate tax kicks in from $1 million to $2 million, while only taxing income above that amount. Today, Massachusetts is tied with Oregon for the lowest estate tax threshold, but Oregon only taxes the amount of the estate that exceeds $1 million, while Massachusetts taxes its entire value.
Amy Pitter, president and CEO of the Massachusetts Society of CPAs, said, “Any time we’re an outlier, doing things dramatically differently from other states, it makes things more complicated and makes us less inviting as a state.”
As the debate moves forward, Baker said his administration is talking to individual lawmakers about how tax relief will help their constituents. “There’s a reason many Democrats and Republicans support one version or another of virtually every tax proposal made here,” Baker said.
House Speaker Ron Mariano has not closed the door on passing a tax bill separate from the state budget, and the governor said he is not concerned whether it passes in the budget or as a standalone bill.
Baker declined to predict his chances of success. “Predictions on how the legislative process is going to work usually end badly,” Baker said.