This week, the Massachusetts House of Representatives unveiled a major new tax relief plan that would change a tax cap law that dictates how the state returns excess revenue to taxpayers. The proposal would change the proportional distribution of excess revenue to be equitable across all taxpayers.
The law, known as Chapter 62F, mandates that the state send refunds to taxpayers if total tax revenues in a fiscal year exceed an annual cap tied to wage and salary growth. The law was somewhat obscure until last year, when officials realized that tax revenue collections exceeded the annual cap by $2.941 billion. It had only been triggered once before, in 1986.
The excess revenue was returned to taxpayers beginning last fall.
The refunds issued under Chapter 62F were doled out on a proportional basis based on one’s personal income tax liability. Taxpayers received checks amounting to about 14% of what they paid in personal income taxes in 2021.
If passed, the House bill would change this so that any refunds sent out under Chapter 62F would be equal for all taxpayers, no matter how much they paid in income taxes.
“That whole package is based on the success of the economy. It only gets triggered when the economy is very, very successful, and we wanted everyone to share in that success. We felt after watching the way the checks were made out and sent out, I think the three of us all sort of agreed pretty early on that there are fairer ways to do this,” House Speaker Ron Mariano told reporters Tuesday, according to video posted online by State House News Service. Mariano was referring to himself, House Ways and Means Committee Chair Rep. Aaron Michlewitz, and Revenue Committee Co-chair Rep. Mark Cusack.
The Massachusetts Fiscal Alliance called on members of the public to oppose this change, and said that Mariano was calling for a rapid vote this week to “avoid backlash.”
“Unfortunately, Beacon Hill leaders want to change the law into a wealth redistribution scheme by changing the rebate so everyone will get the same amount back rather than receiving a rebate based on the amount paid in. This is a page out of the socialist playbook and we all know how that ends,” the organization said in a statement.
Mariano said this week that the bill will go to the floor for a vote Thursday, according to The Boston Globe.
Mariano’s office did not immediately return a request for comment.
“We feel there should be a fairness component in this equation and those in need would be the ones who would benefit the most from a 62F trigger,” Michlewitz told Politico this week.
The House plan would provide $654 million in tax relief over the next fiscal year, according to the Globe. It would, among other things, create a $600 combined child and dependent tax credit, raise the estate tax threshold from $1 million to $2 million, increase tax credits for renters, and lower the tax rate on short-term capital gains.