BOSTON — Gov. Charlie Baker is making a renewed push to cut state taxes after legislative leaders brushed aside his proposal to devote a windfall of surplus funds to provide relief for residents hammered by rising inflation costs.
On Tuesday, Baker gathered representatives of business and tax watchdog groups who urged legislative leaders to pass the raft of tax breaks he filed last month.
Baker said the state has billions of dollars in federal pandemic relief funds and state surplus money as people struggle to pay bills and make ends meet with rising costs from record high inflation.
“It’s time to make sure that we give back some of that surplus to the people who helped put it there in the first place — the taxpayers, workers and families here in the Commonwealth,” Baker told reporters at the Statehouse briefing.
Baker’s buffet of tax cuts, which was filed as part of his fiscal year 2023 budget proposal, called for adjusting state income tax laws and boosting rent deductions to provide relief for low-income residents, expanding tax credits for housing and child care, and for a major overhaul of the state’s estate or “death” tax.
But House Speaker Ron Mariano, D-Quincy, rejected the governor’s tax cuts in the House version of the $49.6 billion budget unveiled last week, saying the cuts “weren’t necessary” in the spending bill. He said the House wants to focus on expanding childcare options, criminal justice reforms and other key issues.
Baker was joined by business leaders and others on Tuesday, who called on lawmakers to approve the governor’s tax cut package.
“The state is awash in money, and the people really need a break,” said John Regan, president of the pro-business group Associated Industries of Massachusetts. “It’s been a rough two years anything we can do to help ease the transition for the pandemic into the post-pandemic time would be wise and appropriate.”
Critics have argued that Baker’s tax cuts are tilted toward the state’s wealthiest, an argument that has been echoed by some Democratic leaders.
But Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, said the tax plan would provide much-needed relief to the state’s “most vulnerable” including senior citizens, working families, and those with modest incomes.
McAnneny said the plan is also “affordable” due largely to better-than-expected tax collections, a massive influx of federal pandemic relief money and the state’s strong fiscal position.
“This is an appropriate time to provide the people of Massachusetts with much needed tax relief, particularly now, against the backdrop of inflation,” she said.
Overall, Baker’s plan calls for cutting taxes by $700 million and updating Massachusetts’ current tax codes that have made it an outlier among states.
One of the proposals would overhaul the estate tax, which is charged to a decedent’s estate when their assets pass on to their beneficiaries.
Massachusetts is one of only a handful of states to charge a “death” tax, which applies to an estate worth more than $1 million. Assets can include stocks and proceeds from life insurance, boats, vehicles and other earthly possessions.
Baker said doubling that threshold to $2 million would save an estimated 2,500 taxpayers more than $231 million.
“We are such an outlier on the estate tax,” Baker said Tuesday. “There’s no other state in America that taxes estates from a first dollar forward, and we’re the only state other than Oregon that starts taxing estates at $1 million.”
Another tax break would increase the adjusted gross income threshold for not paying state income taxes to the federal level. Baker estimates that would provide about $41 million in relief to more than 234,000 low-income taxpayers.
The plan also calls for increasing the rent deduction cap for income tax filers from $3,000 to $5,000, which would provide about $77 million in relief for 881,000 taxpayers. It also calls for doubling the maximum allowed tax credit for senior homeowners from $1,170 to $2,340.
“We have some of the fastest growing rental costs in the country and we haven’t raised the rent deduction in decades,” Baker said. “There are hundreds of thousands of people, many of whom are living paycheck to paycheck, who would benefit enormously from a decision to give them back some of the money that they put out the door to keep a roof over their heads.”
Baker’s tax cuts were filed as a separate bill, which could still be taken up by the Legislature before the July 31 end of formal sessions. But legislative leaders haven’t signaled if they’re prepared to do that.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at [email protected].