Massachusetts Democrats propose slashing capital gains tax in $1.1 billion relief bill
Eden Villalovas
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Massachusetts House Democrats have disclosed a tax relief and reform bill Tuesday and plan to bring it to a vote on the House floor Thursday. The proposal would cut Massachusetts’ short-term capital gain rates from 12% to 5% over a two-year period. Previously, House Democrats opposed the cuts when Gov. Charlie Baker pushed for rate relief.
If approved, the $1.1 billion tax relief bill would cost $654 million in fiscal 2024 and raise to an annual price tag of $1.1 billion in fiscal 2026 and the following years.
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“The tax relief proposal that we released today will help to make Massachusetts more affordable for residents of all income levels, while also ensuring that the we can be more competitive with other states, without compromising the long-term financial security of the Commonwealth,” state House Speaker Ron Mariano tweeted.
The bill includes stretching out a $600 child and dependent tax credit and multiple measures that were previously approved last year by lawmakers but halted in production due to a shift away from targeted tax relief. The credit would be rolled out over three years, meaning taxpayers are eligible to claim $310 per dependent in fiscal 2024, $455 per dependent in fiscal 2025, $600 per dependent in fiscal 2026, and $614 per dependent in fiscal 2027.
The bill will make notable changes appealing to multistate companies, which are currently subject to a three-factor apportionment based on location, payroll, and receipts. If passed, Massachusetts would follow 39 other states in requiring a single sales factor apportionment based on receipts alone.
The bill would also change the 1986 voter-approved tax cap law that ordered the state government to return roughly $3 billion to taxpayers. Until 2022, the law only triggered small rebates in 1987.
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“Currently, the credit is applied to the personal income tax liability of all taxpayers on a proportional basis, resulting in higher credits for those who paid more in taxes,” Mariano’s office said in the summary. “The bill proposes adjusting the credit to an equal amount per taxpayer, rather than a rebate based on a percentage of what taxpayers paid the Commonwealth.”
The bill comes as a House Ways and Means Committee amendment, paralleling a spending bill (H 47) Gov. Maura Healey filed in January of this year, with most motions already enacted into law from separate legislation.