House Speaker Ron Mariano says a state tax cap effect that may take effect this fall is forcing lawmakers to rethinking their current tax relief package. (CHRIS LISINSKI / STATE HOUSE NEWS SERVICE)
A 1980s state statute that Beacon Hill lawmakers seemingly forgot out about until this week might scramble a massive economic relief package — which included $250 tax rebate checks for middle-income taxpayers — that the Massachusetts Legislature was slated to pass before the end of formal sessions Sunday night.
The tax cap in question, enacted through a 1986 ballot question, stipulates the Department of Revenue must return surplus dollars to taxpayers — for example, through a credit or rebate — once the state tax revenue reaches a to-be-determined threshold, which is linked to annual wage and salary growth.
State Auditor Suzanne Bump will delineate that figure by Sept. 20 as all revenues are tabulated, throwing lawmakers a curveball as they must return to the tax break drawing board with murky financial forecasts and scant time remaining in the legislative session.
House Speaker Ron Mariano indicated Friday that lawmakers are now weighing the affordability of their current tax break package under negotiations, which is designed to offer permanent relief to renters, seniors and families, among other vulnerable residents struggling under the crush of inflation.
The $250 rebates are one component within a series of tax breaks being ironed out in an economic development conference committee.
Lawmakers, building off Baker’s $700 million tax break proposal, want to raise the child and dependent care credit from $180 to $310 per child or dependent; increase the earned income tax credit from the 30% match of the federal credit to 40%; boost the rental deduction cap from $3,000 to $4,000; and bump the maximum senior circuit breaker tax credit from $1,170 to $2,340.
Put simply, Mariano said the tax cap “calls into question everything’s that on the table.”
“It does raise the concern of what’s going to happen with future budgets,” Mariano told reporters. “And I know that’s something really far more important to us than it is to the folks in the executive branch right now. But we do have to be mindful of the fact that we’re one of the highest inflation states on the East Coast.”
Mariano snubbed Gov. Charlie Baker, who on Thursday insisted to reporters that pending tax breaks were “eminently affordable” despite uncertainty raised by the newly resurfaced tax cap.
Baker has pressured Beacon Hill for months to advance his $700 million tax relief package, though Senate and House leadership waited until earlier this month to unveil the first signature component of their proposal: $250 stimulus checks to middle-income Bay Staters.
“I mean, you’re talking about a tax year, this past year, in which tax revenue went up by over 20%, which came on the heels of a tax revenue increase the previous year that went up by 15%,” Baker said. “These are sort of unprecedented increases in tax revenues, which is in some ways exactly what this thing (tax cap) was designed to ensure that people in Massachusetts participated in that windfall.”
But Mariano sees a different path for handling the tax cap and its “very convoluted formula”: The Legislature could scrap it altogether.
“We could undo the law, we could change it, we could postpone it,” Mariano said. “I think it’s open for discussion ... It has to go through the House, the Senate and has to be voted on and signed by the governor.”
Baker administration officials, meanwhile, are already brainstorming how to swiftly dole out more tax relief to Bay Staters and adhere to the tax cap, which was only triggered once in 1987.
“We’re looking at what’s the quickest and most efficient way to get that money back to the taxpayers,” Secretary of Administration and Finance Michael Heffernan told reporters Thursday morning, after Baker signed the fiscal 2023 budget into law.
In one analysis so far from the administration, taxpayers may see 7% of their 2021 income taxes returned. That translates into about $250 for a single taxpayer making $75,000.
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