#2023-10, April 14, 2023

House Sends $1.1B Tax Relief Bill to Senate; Includes Association-supported Estate Tax Reform Language

On Thursday, the House overwhelmingly approved a tax reform package (H 3770), voting 150-3 to combine relief for parents, caregivers, renters and seniors; with reported business-friendly changes to the short-term capital gains tax and estate tax designed to bring those laws more in line with other states.

Speaker Ron Mariano’s (D- Quincy) team rolled out the bill on Tuesday, reviving a push they abandoned last year to reduce the tax burden on Bay Staters across the income spectrum and to make Massachusetts a more appealing environment for employers and higher earners, according to House Leadership.

The legislation, H. 3770, which overlaps Governor Healey’s (D – Cambridge) nearly $1 billion tax bill (H 42) in many ways; includes language that would launch a new $600-per-dependent tax credit for families and caregivers, expand breaks for renters, seniors and low-income families, slashes the short-term capital gains tax rate from 12 percent to 5 percent albeit over two years.  The House plans differs from the Governor’s bill by adding a shift to a single sales factor apportionment system for certain businesses and increasing the estate tax threshold from $1 million to only $2 million, while eliminating the “cliff effect” – an issue the Association has supported reform efforts on for roughly a decade – whereas Governor Healey’s plan proposed a $3 million dollar threshold.  

Of note, the lack of changes made during Thursday’s debate ensures the bill heads to the Senate in the exact form House leaders envisioned when they crafted their $56.2 billion fiscal year 2024 budget.  That spending plan, rolled out Wednesday, factors in a $587 million impact from the tax code changes.  House Democrats project that once fully phased in, the tax relief will rise to $1.1 billion per year.  More on the House budget below.

The tax policy debate will now shift now to the Senate, whose Democrat leaders have reportedly stated they are interested in “progressive, permanent tax reform” without outlining many details.

House Seeks Big Spending Increase, Tax Relief In $56.2B Budget

On Wednesday, legalizing online lottery sales, giving expected wagering revenue to childcare providers, significant spending on environmental agencies, and major new investments in education and transportation headline the $56.2 billion state budget bill House Democrats rolled out for consideration in the coming weeks.

Speaker Mariano (D – Quincy) and House Ways and Means Committee Chair Representative Aaron Michlewitz (D- Boston) called their budget a $56.18 billion spending plan, which would be an increase of about $3.73 billion or 7.1 percent over the $52.44 billion fiscal year 2023 budget originally enacted last summer.

Like Governor Healey (D- Cambridge), House leaders in their budget move to spend $1 billion in revenue from a new surtax on high earners, though they called for an even 50-50 split between education and transportation investments rather than the 51-49 division in the governor’s plan.  On the transportation side, the House budget would steer $250 million in surtax money toward MBTA capital investments and $65 million toward a T workforce and safety reserve, while also deploying $5 million toward the rollout of means-tested fares.  Both bills would segregate surtax revenues into an Education and Transportation Fund.

House officials say 1.25 percent of their budget would go toward state environmental agencies, a new spending milestone in the wake of several major climate and clean energy bills that have won approval on Beacon Hill in recent years.

Other House budget proposals include a push to revive and make permanent a pandemic-era renter protection measure, known as Chapter 257, which required eviction cases to be paused while a tenant has an application pending for rental aid; and the latest effort to provide free no-cost communication between inmates and their families.  Unlike Governor Healey’s budget, which would limit the number of free calls to 1,000 minutes per person per month and offer them only to Department of Correction inmates in state prisons, the House bill would not impose a cap and would apply the requirements to both DOC and sheriffs who run county jails.

The proposal also calls for another year of the pandemic-era grants that would be funded from a trio of sources: $250 million from the state’s general fund, $40 million in revenue from the new surtax on high earners, and, in a major policy push House leaders will make in their budget, $200 million in revenue from proposed legalization of online Massachusetts Lottery games.  Top Democrats said Wednesday they believe expanding gambling onto another front will place the Lottery on equal footing with in-person and online sports betting, a nascent industry that has quickly blanketed airwaves with advertisements and attracted a steady stream of players.  The House approved online Lottery sales in an economic development bill last year, but it did not survive in the final version negotiated with the Senate.

Lawmakers deployed Massachusetts dollars to keep providing free meals in schools on a temporary basis after the pandemic-era federal program expired.  The House budget would keep it in place long-term, making Massachusetts the fifth state to do so, and use $161 million in surtax revenue to cover the costs.  More than 80,000 Bay State students have eaten lunch daily in schools since the program’s launch, and it has saved families as much as $1,200 per child per year, according to House leaders.

More along the education front, the proposal calls for about $6.58 billion in Chapter 70 aid for schools, which they said would fully fund the third year of the K-12 funding reform law known as the Student Opportunity Act.  That’s about as much in Chapter 70 funding as Governor Healey sought, though the House bill also features an additional $7.86 million supplement to provide a minimum aid increase of $60 per pupil.  The House bill funds charter school reimbursements at $230 million ($13 million less than Healey’s budget), regional school transportation at $107 million ($10 million more) and the special education circuit breaker at $506 million ($3 million more).

The release of the FY’24 Budget proposal officially opens the floodgates for the expected hundreds of proposed amendments ahead of debate during the week of April 24.

Last Chance: MassSaves to Host Financial Health & Wellness Summit on April 21

The MassSaves Financial Health and Wellness Summit is an annual event for teachers, financial educators, community practitioners and supporters from all backgrounds to network, share and learn to improve financial education.  This year’s summit will be held on April 21 from 10:00AM – 6:00PM at North Shore Community College’s Lynn Campus.

MassSaves is a broad network of public and private stakeholders including financial educators, providers, community organizations and advocates.  Participants work with youth and adults with a vision to make Massachusetts a national model for financial confidence and empowerment, creating a stronger financial future for the entire Commonwealth.

To find out more about the event and to register, click here.