MassachusettsGov. Maura Healey unveileda tax relief proposal Monday, a key feature of her administration’s fiscal year 2024 budget due to be presented to lawmakers on Wednesday.
“This proposal centers affordability, competitiveness, and equity each step of the way, delivering relief to those who need it most and making reforms that will attract and retain more businesses and residents to our great state,” she said in an event at a YMCA in Lynn. She cited “extraordinary” tax growth and “prudent fiscal management” over the past several years in justifying the proposed cuts.
The packagecarries a budget price tag of $742 million; it contains a mix of tax rate cuts and policy changes, including an expanded child and family tax credit.
Massachusetts’ two current child tax credits would be replaced with a single program offering a $600 refundable credit and expanding the potential pool of beneficiaries by removing caps on the number of dependents and lowering the bar on other income-related restrictions that would provide “relief for all income levels,” according to the governor.
The plan also takes note of the housing crisis with a proposal to expand a tax credit program for developers working on new housing.
Renters in the state, who have faced increasing prices amid the housing shortage, are targeted as well.
Currently, renters are allowed to deduct up to 50% of the cost of the rent for their primary residence, up to $3,000. Healey’s plan calls for an increase in the maximum deduction to $4,000, estimating that 880,000 people statewide might be eligible.
Healy also wants to restructure the state’s capital gains tax code by “aligning the short-term capital gains tax rate with the long-term capital gains rate” at 5%, a move that eliminates “a key area where Massachusetts’ tax structure is an outlier compared with nearly all other states.” Short-term gains currently are taxed at 12%, according to Healey’s proposal.
Smaller measures include a decrease in the estate tax rate, an extension of student loan relief programs, and two tax credits for the state’s agricultural industry.
Healey’s tax-relief program attempts to limit resource use “to provide relatively large benefits” to low-income and working-class people in a fiscally affordable way, said Richard Auxier, senior policy associate in the Urban-Brookings Tax Policy Center.
“The types of programs the governor is proposing are a very real type of tax relief for low-income families,” Auxier said. “Instead of cutting a tax rate where everyone has taxable income, these would only go to a relatively small group of people, but the benefit would probably be a relatively sizable benefit.”
Healey’s plan differs in scope from wider initiatives like full income tax rate cuts as seen recently in Mississippi and, given the sour economic forecast, such a style of tax relief may be fiscally prudent as it doesn’t affect the size of the overall tax pool, Auxier added.
“Those are the states that I would worry about because they would face very large questions that are really going to hamper their ability to raise revenue at a time of economic and budgetary volatility, if not crisis,” he said.
35 states passed tax cuts of some form in 2022, according to the Tax Policy Center.