Massachusetts’ House of Representatives overwhelmingly passed a $659 million tax cut package, handing off to the Senate one of the largest tax cut proposals in state history.

In a 150–3 vote, the Democratic-majority House approved a $659 million proposal introduced by Rep. Ronald Mariano last week, a package in line with, but notably smaller, than Democratic Gov. Maura Healey’s $742 million tax relief proposal unveiled in late February.

It contains many of the same proposals for middle-class tax relief, including a $600 child tax credit and measures aimed at seniors at renters, as well as businesses, including the reduction of the short-term capital gains tax over two years from 12% to 5%.

Like the governor’s bill, the House proposal also seeks to reduces the Massachusetts’ estate tax, which currently applies to estates over $1 million. Healey wants to see the tax kick in at $3 million, while lawmakers are seeking a lower $2 million threshold.

Mariano said in a statement the package balanced “permanent financial relief” for residents and businesses without threatening the state’s “the long-term fiscal security” and that it would save taxpayers over $1.1 billion in the next two years while boosting the state’s business profile.

In 2022, 31 U.S. states adopted some form of tax reductions Fitch Ratings said in a report, and while analyst expect no ill effects over the short term, states risked “reoccurring revenue growth” based on the size of the adopted reductions in the years ahead.

“Enacting significant tax policy changes amid an uncertain economic environment increases the risk of unexpected consequences,” the report said, adding that recent tax cut packages have largely been “broader and more ambitious in scope, involving a mix of rate cuts, cash rebates and temporary tax holidays affecting PIT, corporate income taxes and sales taxes.”

That broadness, along with the state’s progressive tax structure, are key in ensuring Massachusetts’ proposed cuts were sustainable over the long term as it allows for greater budgetary “flexibility,” said Richard Auxier, senior policy associate in the Urban-Brookings Tax Policy Center

“It allows you to reduce the burden on some people, like families with children and low-income households struggling with rent or property taxes,” Auxier said. “If you have a flat income tax, and a lower relative income tax, you don’t really have the flexibility to do those kinds of things”

The tax proposals heads to the state Senate ahead of the House’s proposed $56.2 billion budget for fiscal year 2024, which is still under debate.

S&P Global Ratings on Friday raised Massachusetts’ general obligation long-term credit rating to AA-plus from AA, and upgraded bonds backed by annual appropriations from the state.

Moody’s Investors Service maintains an Aa1 rating with a stable outlook while Fitch rates the state AA-plus.

Articles You May Like

Companies around the world hit by Microsoft outage
Gold jumps to record above $2,460 an ounce on hopes Fed will soon cut rates
IMF sees ‘bumps’ in path to lower inflation
UK house purchases hit by global payments issue, warns BoE
Obama and Pelosi add to doubts over Biden amid new calls to quit race