Auditor certification paves way for $2.9b in tax cap credits 

MASSACHUSETTS RESIDENTS COULD soon be receiving tax refunds in the mail after state Auditor Suzanne Bump officially certified that the state’s tax cap law has been triggered and taxpayers are owed $2.94 billion.

Bump announced her certification Thursday morning, five days ahead of the deadline for action. Her decision means the Baker administration can now set in motion its somewhat controversial rush-rush plan to return the money to taxpayers by sending out checks. 

Most of the time, state government moves at a snail’s pace, but not with the tax cap, even though its very existence caught most of Beacon Hill by surprise.

The tax cap was approved in 1986 via a ballot question sponsored by Citizens for Limited Taxation and the Massachusetts High Technology Council. The question set a limit on how much tax revenue the state could take in during a given year and required returning any excess collections to taxpayers via credits on their taxes.

The law has been triggered only once, in 1987, and for a relatively small amount of money — $29.2 million. CommonWealth first reported on July 27 that the tax cap was about to be triggered again for the first time in 35 years – and for a lot more money.  

The news derailed debate on economic development legislation, which contained its own separate tax relief package, and prompted accusations by House leaders that the Baker administration had deliberately kept them in the dark.

There has also been some discussion that the tax cap shouldn’t be as large as it is. A state workaround to a $10,000 cap on a federal tax deduction for state and local taxes inflated state tax revenues in fiscal 2022 by more than $2 billion, most of which is likely to be rebated to taxpayers in coming years.

Bump, in a press release announcing her certification, took note of the extra revenue (most of which will be claimed as credits and deductions in future years), but chose not to make any adjustments to the tax cap estimate.

Her ruling means the debate can now begin on how to return the money to taxpayers. The tax cap law, dubbed 62F in legislative parlance, and its accompanying regulations direct the Department of Revenue to determine what percent $2.94 billion is of the state’s total tax take in 2021. That percentage is then used by each taxpayer to determine how much of their individual 2021 tax payment should be returned as a credit, but the credit can only be taken against the individual’s tax liability for 2022.

It’s a two-step process that means taxpayers would see no benefit until 2023, when they file their 2022 tax forms.

Baker administration officials are moving to accelerate the process of returning the funds. In April, well before the notion that the tax cap could be triggered surfaced publicly, the Department of Revenue put out a notice that it intended to rescind the existing regulation that spells out in detail the two-step process for returning excess tax collections to taxpayers.

This regulation is being repealed because it is obsolete; no credit has been required since 1987,” the hearing notice said. “If a credit becomes available, DOR will issue guidance and update forms specific to the year the credit is allowed.”

DOR hasn’t issued that guidance yet, but Baker has signaled that he intends to send out refund checks to taxpayers as soon as possible. Whether that’s legal or not is an open question.

The 62F law does not define credit, so the Baker administration is taking the position that it can insert its own definition. Baker, at a press scrum on September 6, indicated he saw no difference between a refund check and a credit on next year’s tax forms.

“The definition of a credit can either be a return of revenue or credited next year,” he said.

Peter Enrich, an attorney who worked as general counsel and counsel for revenue policy at the Executive Office for Administration and Finance in 1986 and 1987 when the tax cap law was being debated and implemented, said the definition of a credit is well established in tax law – credits reduce taxes that are owed and are not refunds issued by check.

Bump, in her press release, took no position on how the money should be returned to taxpayers. She only noted that under the tax cap law the money must be returned in the form of a credit.

Baker argues the money should be returned to taxpayers as soon as possible.

“Inflation at this point is rising at a dramatic rate. Gas has come down, but food is still incredibly expensive. Rents have gone up dramatically,” Baker said on September 6. “I think one of the best things we can do here is put money back in the hands of these folks as soon as possible, and, if we can, before the holiday season.”

BRUCE MOHL

 

FROM COMMONWEALTH

Issue of more funding raised: Betsy Taylor, the chair of the MBTA board of directors, indicates to lawmakers at a second T oversight hearing that the transit authority needs more funding. She says the exact amount will depend on the outcome of ongoing staffing and maintenance assessments.

– Sen. Brendan Crighton, the Senate chair of the Legislature’s Transportation Committee, expressed frustration at past MBTA reluctance to ask for more funding. “We’ve been told, ‘we’re all set, we have the money to get the job done.’ But the job has not gotten done,” said Crighton. “The fact that we have to continue to go to the administration to say what can we do shows there is a lack of urgency in addressing these needs.”

Falling behind: A coalition of education advocacy groups says low-income and minority students are falling farther behind in the wake of pandemic-era school closures and hybrid learning. Read more.

 

FROM AROUND THE WEB

 

MUNICIPAL MATTERS  

City Councilor Ricardo Arroyo and five of his colleagues say his Boston City Council committee chairmanships should be restored, but the council president, Ed Flynn, is so far sticking with his order that stripped Arroyo of the posts for at least 60 days following reports of years-old sexual assault allegations against him. (Boston Herald

The town clerk in Monterey filed a federal whistleblower claim against several officials who she said created a hostile work environment. An outside investigator’s report has backed up some of her complaints. (Berkshire Eagle)

HEALTH/HEALTH CARE

Premiums are expected to rise more than 11 percent for some Health Connector shoppers. (State House News Service)

The city of Boston will hand out $75 Visa gift cards to anyone getting a COVID vaccine or booster at a clinic being held this Saturday at White Stadium in Franklin Park. (Boston Herald

WASHINGTON/NATIONAL/INTERNATIONAL

The White House says a marathon bargaining session yielded a tentative deal averting a rail strike that would have shut down freight and passenger trains. (NPR)

The Massachusetts congressional delegation asks the US Department of Agriculture for help after more than $1 million in SNAP benefits for low-income families are stolen through “skimming,” a form of credit card theft. (MassLive)

Suzanne Ianni, a former Natick town official, pleads guilty to charges in connection with the January 6 Capitol riots. (Associated Press)

Gov. Charlie Baker and Lt. Gov. Karyn Polito are among the Republican officials who sign a letter calling on Congress to pass a federal law protecting gay marriage and equal rights for LGBTQ couples. (MassLive)

ELECTIONS

A new report from the Tufts Center for State Policy Analysis warns that money raised from the millionaire’s tax could be diverted to areas other than transportation and education. (Eagle-Tribune

Maura Healey holds a commanding 52-26 lead over Geoff Diehl in the race for governor, according to a new Suffolk University poll, which says Diehl’s embrace of former president Donald Trump is boosting Healey’s support. (Boston Globe) The poll shows the Democratic nominee with the same level of support as a recent Emerson College poll, but unlike the Emerson poll, it also shows Healey leading among independent voters. 

IMMIGRATION 

A planeload of migrants from Venezuela and Colombia, sent by the Florida governor, lands unexpectedly in Martha’s Vineyard, where island officials and volunteers rally to take care of them. (Vineyard Gazette) The New York Times also has a story on the Martha’s Vineyard arrivals. Migrants sent north by bus by Texas Gov. Greg Abbott are showing up in emergency rooms at some Boston hospitals. (GBH)

EDUCATION

The principal of Middlesex Memorial Middle and High School in Lenox who resigned this week was under investigation for an inappropriate relationship with a 15-year-old more than a decade ago at a previous job. (Berkshire Eagle)

The Boston school system is facing a federal lawsuit over allegations that staff members at the now-shuttered Mission Hill K-8 Pilot School failed to stop bullying of students. (Boston Globe

The Boston Teachers Union voted Wednesday night to ratify a new three-year contract, the terms of which had been settled with the city in July. (Boston Globe

ENERGY/ENVIRONMENT

Municipal water systems in Massachusetts are facing challenging times dealing with a shortage of chlorine, the presence of “forever chemicals,” aging pipes, and drought conditions. (WBUR)

The Boston City Council approves a home rule petition that would give Boston the chance of participating in a 10-community experiment banning fossil fuel infrastructure in new construction. (GBH)

CRIMINAL JUSTICE/COURTS

The Northeastern University employee who says he was injured by package bomb on Tuesday evening is pushing back against any idea that he may have staged the event, as law enforcement sources say there are inconsistencies in his account of what happened. (Boston Globe)

The Bristol DA’s office launches an initiative to identify previously unidentified human remains found over the last 40 years. (The Herald News)

Baltimore prosecutors asked a judge to overturn the conviction of Adnan Syed in the 1999 murder of Hae Min Lee, citing the possible involvement of two other people in a case that came to widespread attention when it was featured on the podcast “Serial.” (New York Times)

MEDIA

A Berkshire Eagle editorial applauds the journalism being practiced at the Daniel Pearl Magnet High School in Los Angeles. Daniel Pearl, a Wall Street Journal reporter who was murdered by terrorists in Pakistan in 2002, got his start in journalism at the North Adams Transcript and the Eagle.