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Mass. taxpayers to get nearly $3 billion back from state due to obscure law. Here’s what we know.

State Auditor Suzanne Bump her office determined that $2.94 in state tax revenue must go back to taxpayers.

State Auditor Suzanne Bump said Thursday that her office determined that nearly $3 billion in tax revenue must go back to taxpayers. John Tlumacki/Globe Staff

It seems that Massachusetts taxpayers will be getting $2.94 billion back from the state thanks to an obscure 1986 law that limits how much money can be held in the state’s coffers, The Boston Globe reported.

State Auditor Suzanne M. Bump said Thursday that her office certified that the state is required to return the money to taxpayers.

The voter-passed measure is meant to limit state tax revenue growth to the growth of wages.

Gov. Charlie Baker’s office said Friday that those eligible will receive refunds automatically as a check sent through the mail or through direct deposit, the Associated Press reported. Distribution of refunds is expected to begin in November.

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In general, eligible taxpayers will receive a credit in the form of a refund that is approximately 13% of their Massachusetts Tax Year 2021 personal income tax liability, officials said.

The state also rolled out an online estimator taxpayers can use to calculate their estimated refund.

To be eligible, individuals must have filed a 2021 state tax return on or before October 17, 2022. An individual’s credit may be reduced due to unpaid taxes, unpaid child support, and certain other debts.

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“Given the difficulties associated with inflation, which continues to rage, we would like to get that money back to people sooner rather than later,” Baker said.

The state reached a nearly $5 billion surplus this year when the fiscal year ended in June after receiving nearly over 20% more tax revenue than it did the prior year.

Baker’s aides confirmed to the Globe that even with the revenue return, the state would have about $2 billion in surplus dollars in its bank account.

The 1986 law was triggered once before in 1987 when state coffers exceeded the allowed amount by $29.2 million, according to a previous report from Bump’s office.

In response, the state added a line to the 1987 individual income tax return form where taxpayers could “insert his or her individually calculated share.” The state ended up allocating $16.8 million of the revenue in credits and leaving nearly $12.4 million unclaimed.

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“Our tax cap was intended as an automatic release valve for when revenue surpluses reach an unnecessary level, especially such an extraordinary level as recently,” Chip Ford, executive director of Citizens for Limited Taxation, which helped pass the original ballot initiative, told the Globe. “It was meant as a check on unlimited taxation and unsustainable spending.”

Baker had first suggested in July that the money could be distributed via tax rebates, in the form of a direct payment instead of a credit which would effectively discount what residents pay in taxes.

The law states that any credit must be issued on a “proportional basis,” hence the 13% figure shared by Baker on Friday. But some lawmakers say such a distribution would be regressive, as the people who pay the most in taxes, i.e., the wealthiest, would gain the most from this revenue return, the Globe reported.

Cambridge Democratic Rep. Mike Connolly, has said he would like to see the amount of revenue returned to high-income earners limited so that a greater share of the money goes to middle- and low-income earners, especially when inflation is hitting these groups harder, the Globe reported.

“I certainly don’t think that someone like Patriots owner Bob Kraft should be getting back tens of thousands of dollars when someone working at minimum wage would only see a minuscule return,” he said.

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The Associated Press also contributed to this story.

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