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1. Politics
A $9 REBATE? LOW-INCOME MASS. RESIDENTS WON’T SEE MUCH FROM TAX CREDIT
* Published: Oct. 02, 2022, 6:13 a.m.
The wealthiest Massachusetts residents will see the highest tax refunds when
state officials return nearly $3 billion in excess revenues this fall.Alison
Kuznitz/MassLive
214
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By
* Alison Kuznitz | akuznitz@masslive.com
Massachusetts residents could soon receive tax rebates that vary by more than
$20,000, as state officials adhere to a contentious formula that overwhelmingly
favors the wealthiest Bay Staters.
Eligible individuals can expect checks in the mail or direct deposits equivalent
to about 13% of their 2021 state income tax liability later this fall.
The Baker administration announced the flat rate — which critics and lawmakers
say amounts to a regressive tax — in mid-September, after state Auditor Suzanne
Bump determined that nearly $3 billion in excess revenues must be returned to
residents under a 1980s tax cap law known as Chapter 62F.
“This is definitely a skewed return,” Evan Horowitz, executive director of the
Center for State Policy Analysis at Tufts University, told MassLive. “The
problem with getting 62F out the door is it’s not going to the right people —
it’s not really going to the people who need help paying their bills. You need
to do something totally different.”
The statute, approved by voters through a ballot referendum in the 1980s, has
only been triggered once before.
* Read more: Massachusetts SNAP benefits will increase next month
Beacon Hill budget writers, caught off guard by its impact during the end of
formal lawmaking in late July, decided to scuttle a separate $1 billion tax
relief package that featured permanent changes designed to benefit vulnerable
residents — including boosting the rental deduction cap and child care tax
credit — as they grappled with affordability concerns.
The average tax credit under the rollout of Chapter 62F will be $529, according
to a recent analysis from the Massachusetts Budget and Policy Center.
Households that are among the bottom 20% of earners will receive an average
credit of just $9, compared to those in the middle 20% with a $208 credit and
those in the top 20% with a credit of $1,921. Meanwhile, households with incomes
of $1 million or more could see a credit of more than $22,000, according to the
analysis titled “62F Credits Benefit the Rich.”
“We are giving millionaires the equivalent of a Rolex or more than a semester at
UMass!” senior policy analyst Jason Wright said in the blog post. “In fact,
nearly three quarters of the total credits go to households in the top 20
percent of the income distribution, yet less than one percent of the total
credits go to the bottom 20% of earners.”
Taxpayers would have needed to earn more than $38,461 in 2021 to secure a refund
of more than $250, according to the Massachusetts Taxpayers Foundation.
* Read more: More Mass. liquor licenses? How Ballot Question 3 could impact
your community
Gov. Charlie Baker, in an interview earlier this week, signaled the tax credit
formula warrants scrutiny after rebates are sent out in November.
“The policy is the policy. It was voted on by the voters, and it should be
implemented accordingly,” Baker said Monday on GBH News’ Boston Public Radio.
“If people want to change it at some point afterwards, that’s probably a
conversation that’s worth having.”
In an August analysis from the Massachusetts Budget and Policy Center, Wright
contended that Chapter 62F tax credits “do nothing to improve racial or economic
equity in our state.“
For now, low-income households who do not pay income taxes would not get any
refund under the tax cap law — neither would households who owe $0 once other
credits, like the earned income tax credit and dependent care credit, are
factored in, Wright pointed out.
Equity issues surrounding Chapter 62F are a “legitimate gripe,” House Ways and
Means Chairman Aaron Michlewitz told reporters last week.
“This law has not been tinkered with for 35 years, I think it is,” Michlewitz
said. “We’re not in the process of changing it midstream...but I think it is
something to maybe look towards in the future, of maybe trying to make it a
little more equitable and maybe not as regressive as it is currently. That’s
certainly something we’re going to look towards maybe in the next session or
beyond.”
* Read more: Take our survey: How do you plan to use your Mass. tax refund?
Horowitz suggested state lawmakers pursue a fixed rebate amount to distribute to
taxpayers. A $1,000 tax credit, given out to some 3 million eligible households,
would also mirror the $3 billion figure certified by the state auditor, Horowitz
said.
“That would be extremely progressive,” Horowitz said. “It matters a lot for
people lower down. When you do it even dollar for dollar, that benefits people
who are earning less way more than people who are earning more.”
But to make the biggest difference for Bay Staters buckling under the pressure
of inflation and COVID-19, Horowitz said lawmakers must deliver on their stalled
tax relief package.
Michlewitz said negotiations remain underway, with all tax measures, including
one-time $250 stimulus checks for middle-income residents, still on the table.
The relief is part of a massive $4 billion economic relief package, which
Michlewitz said lawmakers are committed to passing, with hundreds of millions of
dollars in flux for housing, climate change and hospitals, among other
priorities.
* Read more: To qualify for Mass. tax refund, you need to meet this upcoming
deadline
The Massachusetts Taxpayers Foundation, in a policy brief published Thursday,
said the Legislature “can easily” pass a $3 billion economic development package
if they adopt Baker’s proposed fiscal 2022 closeout supplemental budget — or $4
billion if they slash some of the governor’s spending initiatives. That’s based
on swelling state coffers and “historic deposits” into the rainy day fund.
“Massachusetts has a unique opportunity to use unprecedented resources to make
meaningful investments in areas like housing, energy, and infrastructure that
are critical to the state’s long-term economic health while also making tax law
changes that will benefit high-need families, reduce housing and dependent care
costs, and improve the state’s competitiveness,” the brief states. “Lawmakers
must seize this opportunity to do both before this legislative session ends.”
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