March 28, 2023
This Week in Massachusetts – March 28
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Posted on February 27, 2023
Governor Maura Healey’s much-anticipated tax package unveiled this morning would eliminate the estate tax for estates under $3 million and reduce by more than half the state tax on short term capital gains.
The tax proposal will be filed as part of the governor’s first budget, H.1, on Wednesday. The governor is seeking to address the high cost of living for working families while adjusting areas in the tax code where the Commonwealth is an outlier.
The package totals $859 million and will have a $742 million net impact on the budget. Here is a brief explanation of the package below:
The legislative language for these proposals will be released on Wednesday. AIM will review all of the proposals in detail and provide guidance to member companies.
Estate Tax Relief-The proposal would eliminate the estate tax for estates under $3 million and reduce taxes for larger estates. Under current law, estates with a gross value over $1 million are subject to taxation, starting at a rate of 0.8% and growing to a marginal rate of 16%. (Gross value means the value with certain gifts made by decedents added back to the estate.) The administration’s proposal would establish a non-refundable $182,000 credit for each estate, without a tax increase on estates of any size. This credit would have the effect of eliminating all taxes on estates of up to $3 million in net taxable value and would represent $182,000 of tax relief on larger estates.
Short Term Capital Gains -The proposal reduces the state tax on short-term capital gains from 12% to 5%. This change would not have a net effect on the state budget. Capital gains taxes above a threshold of approximately $1.4 billion are not available to the budget under current law. The estimated $117 million in tax savings would be diverted from the rainy-day fund.
Child & Family Tax Credit– The $600 credit is a refundable credit for each qualifying dependent, including children under 13, disabled adults, and seniors. This credit is the centerpiece of the administration’s proposal and an effort to provide relief for working families.
Miscellaneous Reforms- Several additional tax-reform provisions have much lower budgetary impacts and total roughly $17 million.
AIM members with questions about the governor’s tax proposal should contact me at email@example.com.