You heard it for the first time in his last State of the Commonwealth address on Tuesday evening: Governor Charlie Baker wants to give tax relief to parents, low-income people, renters and the elderly.
But they are not the only ones.
The Massachusetts governor unveiled his proposed budget for the upcoming fiscal year at a press conference Wednesday afternoon. With that came details of the tax cuts he would like to push through in his final year at the Corner Office, as well as a few additional beneficiaries who were not mentioned in his speech on Tuesday.
Here is an overview:
- Low-income earners: Baker’s proposal would increase the floor at which Massachusetts residents would begin paying 5% state income tax from $8,000 to $12,400 for single filers, from $16,400 to $24,800 for joint filers and $14,400 to $18,650 for heads of families. Baker’s office said it would bring the state’s “no tax status” threshold in line with federal levels, eliminating income tax for 230,000 residents.
- Low-income seniors: For residents over 65 who earn less than $63,000 a year (or $93,000 for married couples), Baker’s proposal would double a refundable tax credit they can claim on their property taxes, from $1,170 to $2,340.
- Tenants: Massachusetts currently allows tenants to deduct 50% of the annual rent they pay from their taxes up to $3,000. Baker’s proposal would raise the cap to $5,000.
- Parents: Baker’s proposal would double the state dependent tax credit, which can be claimed by any resident with a child under 12, a disabled dependent or an elderly dependent over 65. year. Baker’s proposal would increase the annual credit from $240 to $480 for single filers with one qualifying dependent and to $960 for single filers with two or more dependents. It would also double the rate of the dependent care credit to $360 for filing households with one eligible dependent and $720 for households with two or more people.
- Areas : Massachusetts currently imposes a one-time tax on properties worth more than $1 million when transferred from a deceased person to a beneficiary. Baker’s proposal would raise that threshold from $1 million to $2 million, as well as change the estate tax so that it only applies to the value of a property over $2 million. , rather than the total amount.
- Investors: Baker’s proposal would reduce state tax on capital gains – such as the sale of stocks – from 12% to 5%, the same as state income tax.
In total, Baker’s office estimated the tax breaks would save residents — or cost the state government — $700 million. The Baker administration said no service would be “sacrificed” as a result. Noting that the state’s rainy day fund now stands at $4.7 billion, the Republican governor called the cuts “not only affordable but achievable” in the context of his other spending initiatives.
The proposals still have to go through the State House, and Democratic leaders have been very evasive about the cuts after Baker previewed them on Tuesday. In other words, do not write these tax adjustments into your individual budgets yet.
Still, Baker expressed optimism on Wednesday.
The governor noted that the State House has “taken up some of our tax relief proposals” and said Democrats and Republicans in the Legislature have offered similar tax relief in the past.
Although he said the increased credits and changes to the state’s “no tax status” threshold would help groups reeling from the COVID-19 pandemic and rising costs, Baker also argued that the estate and capital gains tax cuts — seen as disproportionately benefiting more earners — were necessary to keep Massachusetts competitive against its national peers.
“I think some of these proposals are getting a lot of interest because they’re designed to do two very simple things,” Baker said. “The first is to give tax relief to certain people who I think most people would agree would benefit from it, and secondly to deal with some very important issues that affect our competitive position at a time when a lot of people are understanding that they can live and work virtually anywhere.