Boston Business Journal on Massachusetts Budget and Policy Center’s reaction to the Healey Administration proposed changes to the Massachusetts estate tax:
MassBudget assessed three of Healey’s proposed tax credits as progressive, with a larger benefit for lower-income households, but argued that the governor’s two “highly regressive” tax cuts would outweigh the impact of the more progressive initiatives.
The most expensive credit in Healey’s plan, the child and family credit, would be progressive, the group argued. The credit, which would combine the household dependent and dependent care credits to establish a $600-per dependent credit for children younger than 13, people with disabilities and senior dependents 65 and older, is projected to cost the commonwealth $458 million annually.
But the short-term capital gains cut and the estate tax cut would “very heavily favor [the] wealthiest,” the report said.
Healey wants to cut the short-term capital gains from 12% to 5%. This cut, which would directly benefit wealthier households, would cost the state $117 million annually.
Cutting the short-term capital gains tax would also have an impact on racial wealth disparities in the Bay State, according to the report. Nationally, 92% of tax breaks on capital gains go to white families, compared to 3% to Hispanic and 2% to Black families.
MassBudget criticized Healey’s proposed cut to the estate tax, calling it “costly” and arguing that it will “worsen economic and racial disparities in the Commonwealth.”
The estate tax would impact estates valued at $3 million or more, as opposed to the current $1 million. Under current state law, a $3 million estate owes $182,000 of estate taxes. Healey’s proposal would zero out this cost. The report states that “smaller estates, however, can’t utilize the full value of the credit and thus would receive a smaller tax cut.”
According to the report, the Governor’s proposal would cost $275 million a year, with over 70% of the benefits going to estates valued at above $2 million.
Together, the two would cost the state roughly $390 million annually, the think tank said. The report urged the Legislature to not include the two tax cuts in the final tax relief plan and instead use the revenue for other progressive tax breaks, such as a boost to the Earned Income Tax Credit (EITC), reducing waitlists for vocational schools, childcare support, or affordable housing.
“Each of these investments would encourage people to live in Massachusetts and would increase our state’s economic competitiveness,” the report said.
This post is a part of Old Colony Law’s Estate Tax Updates.