REP. MIKE CONNOLLY is fighting a lonely battle to tweak the state’s tax cap so some of the nearly $3 billion due to go back to Massachusetts taxpayers can be redirected to benefit low-income people.
“That’s just good policy,” said the Cambridge uber-progressive.
The tax cap was put on the ballot in 1986 by the Massachusetts High Technology Council and Citizens for Limited Taxation. Approved by 54 percent of voters, the idea was to cap how much tax revenue the state could take in, with the cap tied to the growth in wages and salaries.
The tax cap was triggered in 1987, but only barely. And then for 35 years it lay dormant, largely forgotten, until an unusual set of economic circumstances produced a huge influx of tax revenues this year that ended up exceeding the cap by $2.94 billion.
Connolly, who was six when the tax cap passed, says he doesn’t mind returning excess state cash to taxpayers, but he believes in spreading some of the money to those less fortunate. As calculated by the Department of Revenue, the tax cap would return 13 percent of a taxpayer’s income tax liability to the state in 2021, which means those who paid the most in taxes would get the most back.
The Cambridge Democrat wants to tweak the tax cap to limit how much the state’s wealthiest taxpayers would get back, and steer the freed-up money to those receiving little money back or none at all.
It’s a Robin Hood philosophy that appeals to Connolly, whose campaign website says he was raised in public housing by a single mother, spent time in foster care, and benefited from a Head Start program and other social services. He attended Duke University on a football scholarship and put himself through Boston College Law School.
Connolly said wealthy Massachusetts residents like Bob Kraft, the owner of the New England Patriots, don’t need all of the extra money they would get back under the tax cap. “There’s something obscene about it,” he said.
The tax cap was triggered in part because of a tax break geared toward wealthier residents. State Auditor Suzanne Bump took note of the tax break in certifying the $2.94 billion figure.
“I would underscore for the Legislature and the public one key element in the FY22 revenue increase,” Bump said. “The change in the taxation of so-called pass-through business entities, which just took effect last year, generated $2.25 billion in revenue, much of which has yet to be claimed in the form of personal income tax credits and deductions by the business owners.”
What Bump means is that some wealthy residents will benefit twice – once under the tax cap by getting back a portion of the income taxes they paid in 2021, and again by claiming credits and deductions using the tax break for pass-through business entities, which is a workaround to a federal law limiting tax deductions for state and local taxes to $10,000.
Time is running short for Connolly, in part because Gov. Charlie Baker has done some tweaking of the tax cap law himself. The original drafters of the tax cap were careful in crafting the law to return excess tax collections in the form of credits to be applied to future tax payments. That way the law wouldn’t be confused with an appropriation, which is not permitted with a referendum question.
Baker, however, has turned the credits into refund checks due to go out to taxpayers in November or early December. He says he wants to get the checks in the hands of Massachusetts residents as soon as possible to help them deal with the financial impacts of inflation.
While there was some talk in July among House leaders of tinkering with the tax cap law, Connolly is the only lawmaker publicly raising the cry now. He wants the Legislature to return to formal session to address the tax cap, which is known as 62F in legislative parlance. He has asked for a meeting of the House Progressive Caucus to discuss the issue and hopes progressives in the Senate will do the same.
“Everyone should be paying attention to what’s happening with 62F,” he said. “It should really be about good policy.”