Massachusetts Legislature Passes Comprehensive Tax Relief Package
Bill includes $561.3 million in tax relief in Fiscal Year 2024, $1.02 billion in Fiscal Year 2027 and beyond
(BOSTON – 09/28/23) With the goal of providing financial relief to families across the Commonwealth while making Massachusetts more competitive with other states, the Massachusetts Legislature overwhelmingly passed a bipartisan tax relief package supporting residents across all income levels on Thursday.
“This tax relief package strikes the critically important balance of providing permanent financial relief to residents and businesses across Massachusetts, without compromising the long-term financial security of the Commonwealth,” stated Speaker of the House Ronald J. Mariano (D-Quincy). “I’m confident that this tax reform legislation will help to make Massachusetts more affordable for all residents, while also helping to make the Commonwealth more competitive with other states. I want to thank Chairman Michlewitz, the members of the conference committee and all the members of the House, as well as Senate President Spilka and our partners in the Senate for working diligently to get this done.”
“This is the most significant tax relief package in a generation,” said Senate President Karen E. Spilka (D-Ashland). “This legislation is going to put real dollars into the pockets of the people who need it most, including parents, seniors, young people, and middle class families who are struggling to keep up with rising costs. This bill includes a historic expansion of housing programs that will ignite affordable housing development and ease the housing crunch, as well as significant relief for families with young children. It will also make Massachusetts a more competitive place to live and work, and encourages businesses to continue investing in our region. I am deeply grateful for the work of Chair Rodrigues and Senator Moran on this package, as well as all of the Senate members, and offer my sincere thanks to Speaker Mariano and our colleagues in the House for their partnership and collaboration.”
“This tax relief package will help thousands of residents keep more money in their pockets by providing much needed financial assistance,” said Representative Aaron Michlewitz, Chair of the House Committee on Ways & Means (D-Boston). “This package will also help keep the Commonwealth an economically competitive work environment for both businesses and workers. "I want to thank Speaker Mariano for his leadership, my counterparts on the conference committee for their tireless work to make this legislation possible, as well as the entire Legislature for their collaboration on this issue.”
“I am very pleased and proud to vote on the final conference committee’s report on tax relief, a joint Senate–House collaboration which resulted in a landmark proposal that is both fiscally sustainable and progressive in nature,” said Senator Michael Rodrigues, Chair of the Senate Committee on Ways & Means (D-Westport). “This broad-based and well-rounded tax relief package will help families, residents, and businesses, with a targeted focus on tackling our most pressing housing challenges. The focus on housing, increased tax credits for working families, and progressive tax code changes will make the Commonwealth more affordable, equitable, and competitive for the future. A sincere thank you to President Spilka, fellow conferees Senator Moran and Senator Tarr, my Senate colleagues, and Speaker Mariano and House Chair Michlewitz, who all worked tirelessly to get this package completed.”
The compromise bill includes the following tax changes:
Child and Dependent Tax Credit
The bill increases the refundable tax credit for a dependent child, disabled adult, or senior from $180 to $310 per dependent in taxable year 2023, and then to $440 in taxable year 2024 and beyond, while eliminating the child/dependent cap. This expanded credit, which will benefit more than 565,000 families, will be the most generous universal child and dependent tax credit in the country.
Estate Tax
Massachusetts’ current estate tax, which has not been updated in many years, has become an outlier in several ways. The changes made in this bill update the tax to bring it more in line with other states and eliminate punitive elements of the tax for those with incomes just high enough to trigger it. The bill reduces the estate tax for all taxpayers and eliminates the tax for all estates under $2 million by allowing a uniform credit of $99,600.
Earned Income Tax Credit (EITC)
This bill increases the refundable Earned Income Tax Credit (EITC) from 30 per cent to 40 per cent of the federal credit. This increase will provide crucial support to working individuals and families, benefitting nearly 400,000 taxpayers with incomes under $60,000.
Single Sales Factor Apportionment
Currently, most businesses in Massachusetts are subject to a three-factor apportionment based on location, payroll, and receipts. To support companies headquartered in Massachusetts, this bill establishes a single sales factor apportionment in the Commonwealth based solely on receipts, matching what 39 other states currently do.
Senior Circuit Breaker Tax Credit
This bill doubles the refundable senior circuit breaker tax credit, which supports limited-income seniors facing high rents or real estate taxes, from $1,200 to $2,400. This change is expected to impact over 100,000 seniors across Massachusetts.
Rental Deduction Cap
This bill increases the rental deduction cap from $3,000 to $4,000. This is expected to impact about 800,000 Massachusetts taxpayers.
Short-Term Capital Gains Tax
At 12 per cent, Massachusetts is among the states with the highest short-term capital gains tax rate, and taxes short-term capital gains at a higher rate than long-term capital gains. The bill lowers the short-term capital gains tax rate to 8.5 per cent.
Housing Development Incentive Program (HDIP)
The bill increases the statewide cap from $10 million to $57 million for 2023, and subsequently to $30 million annually, which will provide Gateway Cities with an expanded tool to develop market rate housing. This increase is estimated to create 12,500 new homes in Gateway Cities and spur over $4 billion of private investment in these communities.
Low Income Housing Tax Credit
This bill raises the annual authorization from $40 million to $60 million. This increased authorization cap provides enough funding to spur the creation of thousands of new units of affordable housing annually while also bolstering economic development.
Local Option Property Tax Exemption for Affordable Housing
This new policy will permit municipalities to adopt a local property tax exemption for affordable real estate that is rented by a person whose income is less than a certain level set by the community.
Title V Cesspool or Septic System Tax Credit
This bill will triple the maximum credit from $6,000 to $18,000 and increases the amount claimable to $4,000 per year, easing the burden on homeowners facing the high cost of septic tank replacement or repair.
“The overwhelming support of the House of Representatives on this tax relief package speaks to our commitment to making Massachusetts a better place to live, work and invest,” said Representative Mark Cusack, House Chair of the Joint Committee on Revenue (D-Braintree). “I want to thank Speaker Mariano and Chair Michlewitz for their leadership and our legislative colleagues for supporting it. This balanced package is an important step to meeting the needs of our residents as we remain dedicated to improving our Commonwealth.”
“This tax package will generate real relief for countless residents,” said Senator Susan Moran, Senate Chair of the Joint Committee on Revenue and coauthor of the Conference Report (D-Falmouth). “I’m proud to have worked hand in hand with my fellow conference committee members to craft this critical and timely legislation and I’m grateful to Senate President Spilka and Chairman Rodrigues for their leadership. From increasing support for families and encouraging housing production to stimulating the growth of small businesses and relieving the significant financial burdens of septic improvements, this bill takes big steps to ensure Massachusetts remains the best state in the nation for folks to call home.”
Additional Tax Changes
Lead Paint Abatement: Doubles the credit to $3,000 for full abatement and $1,000 for partial abatement, to support families with older homes.
Dairy Tax Credit: Increases the statewide cap from $6 million to $8 million, to provide more assistance for local farmers during downturns in milk prices.
Student Loan Repayment Exemption: Ensures that employer student loan payments are not treated as taxable compensation.
Commuter Transit Benefits: Makes public transit fares, as well as ferry and regional transit passes and bike commuter expenses, eligible for the commuter expense tax deduction.
Apprenticeship Tax Credit Reforms: Expands the occupations for which this workforce development credit is available.
Cider Tax: Raises the maximum amount of alcohol for these classes of drinks to 8.5 per cent, allowing more locally produced hard cider and still wines to be taxed at a lower rate.
Senior Property Tax Volunteer Program: Increases from $1,500 to $2,000 the maximum that municipalities may allow for certain seniors to reduce from their property tax by participating in the senior work-off program.
“These changes represent the first step on a journey towards a brighter and more equitable future,” said Representative Michael J. Soter (R-Bellingham). “This is just the beginning, and while these changes are a start, we acknowledge that they aren't perfect. This legislation brings much needed relief to everyday citizens of Massachusetts and helps our constituents continue to call Massachusetts home. It is our hope that these reforms will help to make Massachusetts more affordable and more competitive.”
“Today the Senate took action, long in the making, to provide desperately needed tax relief to respond to household budgets under stress and employers struggling to compete in a state whose costs are a major challenge,” said Senate Minority Leader Bruce Tarr (R-Gloucester). “I have been honored to not only serve on the conference committee for this legislation, but also to work across the aisle consistently to build consensus and partnership on a matter that has been a top priority for the Senate Republican caucus for years, and a necessity for the people who pay the bills for our state government. Over the past two years we have worked to illustrate the heavy burdens being carried by people in our state for things ranging from childcare to housing, and the uphill climb employers are facing on the road to greater prosperity for our economy. This legislation is a major first step that will make a real difference for all of them.”
Additional Reforms
In addition to tax relief, the bill updates Chapter 62F of the Massachusetts General Laws, which triggered nearly $3 billion in taxpayer refunds in 2022. This law requires that excess revenue be returned to taxpayers when tax revenue collections in a given fiscal year exceed an annual tax revenue cap. The bill passed today ensures that each credit is applied equally to every taxpayer.
The bill also adjusts the Stabilization Fund cap, allowing the Commonwealth’s savings account to retain more funding. In addition, the bill requires married taxpayers who file a joint return with the federal government to file a joint state return, subject to exemptions or adjustments promulgated by the Department of Revenue (DOR).
Having passed the House of Representatives and Senate, the bill now goes to the Governor for her consideration.
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