Recent Massachusetts Tax & Budget Proposals
Governor Maura Healey released a tax relief package, along with her first proposed budget last week. Although it is early in the process for both proposals, there are a number of key points to monitor as things move to the legislature for further action.
The Commonwealth’s fiscal situation remains quite good; however, many are concerned about the potential long-term impact of the new income surtax that took effect on January 1, as well as the competitiveness of Massachusetts versus its neighboring states (and others), given the cost of housing and other factors.
Tax Relief Package
This current tax relief package is geared more toward individuals than business taxpayers. The most notable provisions are as follows:
- Reduction in short term capital gains tax rate from 12% to 5%;
- Estate tax reforms, including reducing the tax burden overall and eliminating the tax on estates of less than $3 million – currently, the exemption is only $1 million in Massachusetts;
- Creation of a broad-based child and family tax credit of $600 per qualifying dependent;
- Creation of a student loan debt assistance deduction;
- Increase in the cap on rental deduction from $4,000 to $3,000; and
- Doubling of the senior circuit breaker credit.
The tax package also contains a new credit that would benefit live theater productions, an expansion of the current commuter deduction, an increase in the lead paint abatement and septic credits, a proposal to lower the tax rate on sales of certain ciders, and some tweaks to the Commonwealth’s Housing Development Incentive Program (HDIP) and the Brownfields tax credit program. The dairy and apprenticeship credits would also be expanded.
The effective date for each of these proposals would be January 1, 2023.
Most notably, Governor Healey’s fiscal year 2024 budget proposal contains no new broad-based taxes on either individuals or businesses.
The administration has proposed placing $1 billion of the anticipated revenues from the new income surtax (Question 1 from last year’s ballot initiatives, now Article CXXI in the Massachusetts Constitution) in a new trust fund, the use of which would be explicitly limited to education and transportation.
Language also has been proposed that would codify the new surtax into Chapter 62 of the Massachusetts General Laws. Additional guidance regarding the surtax and its implementation and workings is still needed, however.
We will be following these items, as well as other developments in Massachusetts taxation, as things progress. In terms of timing, Joint Ways and Means hearing will take place this month. Then, the House will release its budget in April, followed by the Senate in May; after that, conference committee meetings begin, with the hope that the governor will be able to sign a final fiscal year 2024 budget by its start date of July 1, 2023.
If you have any questions or if you would like to further discuss any of these items in more detail, please contact Leanne Scott or your preferred BNN advisor at (800) 244.7444.
Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.