The Healey administration has presented a tax relief proposal worth $859m, to provide new breaks for hundreds of thousands of Massachusetts residents.
Tax Relief Proposal
The tax relief proposal would reduce the state’s cost of living and improve its economic competitiveness, particularly as businesses are becoming more remote or are using hybrid work schedules.
In a published article in METRO WEST DAILY, The largest part of the relief package ($458m) would be in the form of new child and family tax credits, which would be created by introducing a $600 refundable credit for each eligible dependent, including children under 13, disabled adults, and seniors.
The existing Household Dependent Tax Credit and Dependent Care Tax Credit would be combined, with the cap on dependents being removed and the total benefit increased. The new credit under the tax relief proposal is estimated to apply to 700,000 taxpayers who care for over 1 million dependents.
Other Benefits of Tax Relief Proposal
The tax relief proposal would also increase the maximum rental deduction from $3,000 to $4,000, impacting 880,000 renters, and double the maximum allowable credit for the senior circuit breaker credit, helping 100,000 households.
There would also be a new estate tax credit of up to $182,000 to effectively eliminate the estate tax for all estates valued up to $3 million, as well as a reduction of the short-term capital gains tax rate from 12% to 5% to align it with the rate on long-term capital gains and most other forms of income.
Other aspects of the tax relief proposal bill include a Housing Development Incentive Program tax credit cap increase, boosted apprenticeship tax credits, and expanded commuter transit benefits, according to an article published in Boston Herald.
The Healey administration has stated that the tax relief proposal has a net cost of $742 million, as the $117 million in affected short-term capital gains tax revenue by law would need to be placed into reserves and could not be spent as part of the annual budget.
The Democrats who control the House and the Senate will need to decide whether to increase or decrease the scope of Healey’s proposal. The administration is hoping that the tax relief proposal will attract working professionals to Massachusetts, aid businesses as they recruit a skilled workforce, and help the state maintain its economic edge by making Massachusetts more affordable.