The House and Senate on Thursday enacted and sent Governor Healey a compromise tax reform bill. The compromise bill reconciling the House and Senate versions previously passed by each chamber would be phased in over a period of years and would provide $561 million in tax relief in the current fiscal year 2024, and it is projected to increase to over $1 billion by fiscal year 2027. The bill is intended to provide relief to individuals and families to address issues related to the cost-of-living affordability in the commonwealth, as well as improve the competitive economic position of Massachusetts to attract businesses and workers.
To achieve affordability goals, the bill would combine two existing tax credits — for child care and dependent care — into one, and would allow taxpayers to claim $310 per dependent in the first year of implementation. The new credit would then jump to $440 per dependent in the second year. The bill would also double the tax credit for seniors who rent or own in Massachusetts from $1,200 to $2,400, raise the deduction for renters from $3,000 to $4,000, and increase the state’s Earned Income Tax Credit — designed to help low-income families — from 30 percent to 40 percent of the federal credit.
To increase the state’s competitive position, the bill would reduce the tax rate on short-term capital gains, which stem from the sale of assets held for a year or less, from 12 percent to 8.5 percent and modify and simplify how the state calculates taxes owed by multistate companies by relying solely on the amount of a company’s sales within the state.
Finally, the bill would modify the estate tax credit by effectively doubling the threshold at which the levy is triggered from $1 million to $2 million.
Governor Healey has ten days to review the bill.