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Governor Submits Budget, Tax Proposals

Posted on January 28, 2022

Massachusetts Governor Charlie Baker’s last week submitted his proposed budget for Fiscal Year 2023. H2 in total proposes $48.5 billion in spending, built upon the consensus agreement of 2.7 percent revenue growth over the revised Fiscal Year 2022 benchmark.

The proposed budget contains no new broad-based tax increases on businesses. The proposal represents a prudent use of state resources. While expenditures are growing, this budget does not create new significant financial obligations on the commonwealth that will burden future budgets.

As part of the budget, the governor filed a tax relief bill. The bill contains several provisions that AIM has supported in the past. We are gratified to see the state returning some of the surplus to the taxpayers.

Proposal Annual amount Est. Taxpayers Affected
Dependent Related Credits: double each of the credits for dependent care ($ 167 M) > 700,000 families
Rent Deduction: increase cap from $3K to $5K ($77 M) ~ 881,000 taxpayers
Senior Circuit Breaker: double max. credit ($60 M) 100K+
Estate Tax: eliminate cliff effect and raise threshold from $1M to $2M ($277 M) ~2,500 taxpayers
Short-Term Capital Gains: reduce rate from 12% to 5% ($117 M) 150K
No-Tax-Status Threshold: match federal thresholds ($41 M) ~234,000 low-income taxpayers

Several tax-policy proposals were contained in the outside sections of the budget, separate from the tax cut package.

Personal Income Conformity – This proposal conforms the Massachusetts personal income tax code to the Internal Revenue Code in effect for 2022. The state currently conforms to the 2005 version. The conformity would be static, meaning the state would remain tied to the 2022 version and not atomically adjust in future years.

Daily Sales Tax Remittance for Credit/Debit Card Processors – Starting in 2026 credit and debit card processors would be required to remit sales tax daily.

Sports Betting – The budget contains a proposal to legalize and tax sports wagering. The House of Representatives passed similar legislation earlier this year, but the Senate has not taken action. The governor projects sports wagering would bring in an addition $35 million in revenue.

Research Tax Credit – The proposal is a technical correction to the Research Tax Credit. It clarifies which industries are eligible by addressing ambiguous language.