Gov. Maura Healey signed a $1 billion-a-year tax relief bill Wednesday that her predecessor, former Gov. Charlie Baker, pushed for until the end of his term only to see the clock run out when the legislative session came to an end.
Almost two years of discussions, debates, and delays later, it was Healey, a first-term Democrat, who signed and claimed credit for the law in front of a large audience of supporters. And it was Healey who was able to declare that “tax cuts are officially here in Massachusetts.”
“The first major tax cuts in over 20 years, it just happened today. They’re here for everyone. They’re going to save you money in a bunch of ways,” Healey said after signing the bill inside the State House.
Healey’s signature caps off nearly two years of work that started when Baker filed his own proposal at the start of 2022. But lawmakers scrapped tax relief plans months later when the state had to send back $3 billion in tax refunds to residents.
Healey filed her bill earlier this year, kicking off the tax relief debate again, with House and Senate lawmakers passing versions in April and June, respectively. A panel of six lawmakers retreated into closed-door deliberations shortly after Senate passage, where the bill sat for months.
Negotiators reached a deal two weeks ago that cuts the short-term capital gains tax from 12% to 8.5%, a business-backed move that has riled progressives who argue it gives a break to the wealthy. The compromise will cost the state $561 million in fiscal year 2023 and $1 billion a year starting in fiscal year 2027.
House Speaker Ronald Mariano said negotiators hit “a couple bumps in the road” as they worked towards a deal.
“Two years of trading proposals, going back and forth, fine tuning language, finding common ground on two bills that were desperately far apart, and to bring them into a vehicle that we have here today and we had signed into law today, it’s truly a feat that should be applauded,” he said.
Lawmakers also worked in boosts to the rental deduction cap, a tax credit for a dependent child, disabled adult, or senior, and the statewide cap for a housing production program. The bill also excludes estates valued up to $2 million from the estate tax by allowing for a uniform credit of $99,600.
The bill reworks the distribution formula for the state’s tax cap law known as Chapter 62F, which now requires excess tax revenue to be sent back to residents equally, regardless of how much they paid into the system. That move generated criticism from some.
Married couples will have to select the same filing status on state taxes that they use on federal taxes, a provision legislators included in the final compromise and argued would help boost revenue collected under a surtax on incomes over $1 million.
