Twenty months elapsed between Republican Gov. Charlie Baker using his final State of the Commonwealth address in January 2022 to ignite debate about slashing taxes and the final enactment of a roughly $1 billion package.
So what was the turning point that helped lawmakers overcome all the bumps and disagreements they had hit along the way?
One factor, according to House Speaker Ron Mariano and Senate President Karen Spilka, was a simple personnel change: voters selected “a new governor.”
“I want to begin by thanking the governor,” Mariano said Wednesday, flanked by more than a dozen lawmakers and Gov. Maura Healey as the first-term Democrat put her signature on the tax relief bill. “The governor has kept our feet to the fire and kept this on the front burner when we had many reasons to question how far we wanted to go and what, exactly, we wanted to do.”
The nearly two-year affair that spanned a pair of governorships came to a close Wednesday with Healey’s approval of the bill (H 4104), an event that policymakers turned into a cacophonous victory lap in the State House Library.
On hand for the event were think tank and business leaders like Doug Howgate of the Massachusetts Taxpayers Foundation, Housing Secretary Ed Augustus, and a cross-section of lawmakers from both parties, including top deputies as well as rank-and-file newcomers.
“I know many of you doubted us, but I never had a doubt that we would get this done eventually,” Senate President Karen Spilka told the crowd. “In speaking to the speaker and the chairs and others, we all recognized — and then when the new governor came in, we recognized that the time was right that we needed to get this done.”
Several parts of the final package that are now law were previously debated and approved by the Legislature last year before top Democrats decided to spike the idea when they learned state government owed nearly $3 billion back to taxpayers under a long-dormant tax cap law.
Baker and Spilka were ready to move ahead with the targeted tax relief bill last year, but Mariano had second thoughts even though tax collections had soared to unimaginable levels, enabling the state to unleash waves of new spending while also stockpiling cash in government’s reserve account.
“We began this process, and then the surprise by the governor telling us we owed another $3 billion — ,” Mariano said.
Spilka interjected, “The former governor.”
“I’m sorry,” Mariano continued as the audience laughed. “The former governor dropped a little bomb on us, and at the same time, we were getting some readings out of the financial folks that the potential for a recession was on the horizon. So we, using a bit of discretion, slowed the process down and pulled back a little bit. With the change of the election, a new governor, having paid the $3 billion we owed, we decided that the tax levies had been fairly stable, so we could take another look at this.”
While they were pondering the tax relief bill, Democrats were able to secure a large tax increase through an income surtax on wealthier households that voters approved in November in the form of a constitutional amendment.
Healey backed the income surtax while making a promise to provide tax relief a centerpiece of her campaign, and she formally revived tax relief debate soon after taking office in January.
Although there’s still some talk about the possibility of a recession, Healey struck a celebratory tone Wednesday, describing the tax cuts as the first of their kind in more than 20 years. At one point, she encouraged the crowd of lawmakers, advocates and legislative staff they could “keep clapping” while she rattled off a summary of the people who would benefit from the new changes in the state tax code.
Under the pressures of a high cost of living and a competitive business climate, Healey said, “everyone feels the pinch, and our future starts to shrink.”
“The most direct thing that government can do is to show that we get it. How do you show that you get it? By actually putting money back in people’s pockets, to take some of that pain away, to cut taxes and to deliver,” Healey said. “That’s why we can say today: Massachusetts, tax cuts are here, and everyone is going to benefit from them.”
Many taxpayers won’t get much relief under the new law, which features a laundry list of changes that will benefit specific groups of people.
The biggest single piece of the bill is an overhauled child and dependent tax credit, which will provide parents and caregivers with $310 per dependent this year and $440 per dependent next year and beyond. Changes to the senior circuit breaker tax credit could save some taxpayers up to $1,200 per year, while renters are in line for an extra $50 annually thanks to an increase to the maximum rent deduction, according to a WBUR analysis.
Other reforms to the short-term capital gains tax rate, the estate tax threshold and the process for calculating taxes owed by multistate companies had long been championed by business groups, who have argued Massachusetts needs to update those levies to better compete with other states.
The package also takes aim at one of the most pressing problems facing Bay Staters — out-of-reach home prices and rents — through a more indirect route. It expands tax credits and incentives available to housing developers, seeking to spur additional development that could address a shortage of affordable units.
“We have new housing investments that will reduce rents and increase homeownership with more of that to come in the next few weeks,” said Healey, who has gestured at plans to soon file a policy-laden housing bond bill.
Healey signaled that Wednesday’s bill-signing will not be the final punctuation on tax relief. Starting on Thursday, Healey said, she and Lt. Gov. Kim Driscoll will “head out around the state to raise awareness about these tax cuts and to answer questions about them.” The tour kicks off on Thursday with visits to Gardner and Haverhill.
The bill won praise from many business groups, while the Massachusetts High Technology Council gave it a mixed review, arguing that it will “only marginally change how Massachusetts compares with other states.”
“The High Tech Council appreciates the effort Governor Healey and the Legislature put into this first step towards addressing the state’s tax outlier status,” Chris Anderson, the group’s president, said in a statement. “Unfortunately, the final tax ‘relief’ legislation falls short of delivering the meaningful change needed, as it includes both an expansion of the voter-approved income surtax and an unconstitutional redistribution of income through changes to the voter-approved Chapter 62F rebate formula.”
Voices on the left were also less enthused about the final product. The Progressive Massachusetts group contrasted the $1 billion in relief with the roughly similar amount of revenue the state expects to generate this year from a new surtax on high earners, revenue from which will be earmarked for education and transportation investments.
“It is simply not acceptable for legislators to say ‘We don’t have the money’ when it comes to meeting basic needs, when they are willing to spend hundreds of millions of dollars on unnecessary and regressive tax cuts for the rich and large corporations,” the group said in an unsigned statement. “Our commonwealth has the resources we need to solve the great challenges we face; the question is whether our elected officials have the will to do so.”
(Copyright (c) 2023 State House News Service.