(The Center Square) – New analysis of Massachusetts’ Senate tax package reveals the bill won’t do much to make the Bay State more competitive.
Pioneer Institute’s analysis “Senate Tax Package Misses the Mark on Competitiveness” would shift the overall tax burden in Massachusetts to higher-income earners but cannot prevent the acceleration of the out-migration of high-income earners that has been taking place in recent years.
The analysis, authored by Eileen McAnneny, Pioneer Institute’s Senior Fellow in Economic Opportunity, reveals Senate Bill 2397, An Act To Improve The Commonwealth’s Competitiveness, Affordability, and Equity, would offer relief through a variety of credits to low- and moderate-income taxpayers.
McAnneny wrote that the bill “includes reforms to the estate tax law,” similar to what was proposed last year. However, she noted that the reforms are “less generous than either the governor’s or the House’s proposal.”
According to the analysis, the bill is missing any short-term capital gains tax reductions and other provisions that would curb the out-migration of higher-income earners seeking states with no or lower tax rates.
As previously reported by The Center Square, Pioneer Institute released a study last month showing taxation has accelerated out-migration in Massachusetts five-fold from 2012 to 2021. The report cited that those earning more than $200,000 or more and are responsible for 60% of the state’s lost wealth began migrating out of Massachusetts since the beginning of the COVID-19 pandemic.
However, the analysis shows that the legislation, if enacted, would increase the Earned Income Tax Credit to 40% from 30% of the federal allowance and would increase the child and dependent tax credit to $310, from $180, per child or dependent while removing caps for the overall number of children and dependents.
According to the analysis, the legislation would also add regional transit passes and bike commuter expenses to be claimed as commuter expenses. It would also allow an individual to deduct student loan repayment assistance received from their employer.
The analysis shows that for housing options, the senior circuit breaker tax credit cap would move to $1,500 from $750 and increase the rental cap to $4,000 from $3,000. Additionally, the Housing Development Incentive Program Tax Credit would be pushed to $57 million in 2023, placing an annual cap at $30 million, up from $10 million, in the following years.
According to the analysis, the bill does have provisions offering cost-of-living relief and housing costs. But there is only one major proposal in the bill that would address the Bay State’s competitiveness by exempting estate values falling under the $2 million threshold and removing the “tax cliff” by establishing a uniform $99,600 credit for items falling under the estate tax.
McAnneny wrote in the analysis that the “Senate bill would mean increasing reliance on a smaller group of taxpayers” to shoulder the state’s overall tax burden. She said that “could prove problematic over time.”
