BOSTON — The state’s business leaders are calling for more robust tax cuts in a relief package set to be taken up by the state Senate this week.
On Thursday, the Senate is expected to debate a $590 million proposal with a buffet of permanent tax changes aimed at providing relief to inflation wary consumers and helping the state attract new residents and businesses.
The legislation includes expanded tax credits for affordable housing, child care, renters and seniors as well as an overhaul of the estate or “death tax”, which is charged to a decedent’s estate when the assets pass on to beneficiaries.
But the Senate plan doesn’t include plans to reduce the state’s short-term capital gains tax from 12% to 5%, a key element of a tax relief plan filed by Gov. Maura Healey, which won approval by the House of Representatives in April.
Business leaders are urging lawmakers to include the tax relief in the plan, arguing that the current proposal doesn’t do enough to improve the state’s affordability.
“The data shows that high-income earners are significantly contributing to the loss of wealth from the state and the Senate’s proposal does not go far enough to mitigate this out migration,” said Elizabeth Mahoney, vice president of policy and government affairs at the Massachusetts High Technology Council.
Mahoney urged senate leaders to adopt proposed amendments to the tax relief bill that “urgently address the areas where Massachusetts is a national outlier” such as the short term capital gains rate and estate tax exemption limit.
Business leaders also want the Senate to provide additional relief from the estate by raising the current $1 million threshold that triggers the levy.
While Healey had called for increasing the threshold to assets valued at more than $3 million, the House approved version and the Senate’s proposal would raise the cap to $2 million.
Brooke Thomson, the newly appointed president of the pro-business group Associated Industries of Massachusetts, is among those urging Beacon Hill leaders to include the tax deduction on short term capital gains and expanded estate tax reform in a final version of the bill, “so that Massachusetts can be competitive and grow our economy.”
“With the state losing one hundred and ten thousand residents during the past three years there is clearly a workforce and demographic crisis in the commonwealth,” she said in a statement. “Bold tax reforms will immediately impact the bottom line for families and while other holistic policies are also necessary, the state should emphasize reforms with the fastest impact.”
Chris Carlozzi, state director of the National Federation of Independent Businesses, said said the estate tax threshold should be raised to at least $3 million to help improve the state’s competitive edge.
“After last year’s failed attempt to provide tax relief for Massachusetts small businesses and consumers, the need for meaningful reform is critically important this session,” he said.
Carlozzi said the Senate should also consider a broader approach to tax relief by supporting amendments to lower the state’s 6.25% sales tax, lengthen the sales tax holiday, and “end the onerous sting tax so Massachusetts can actively compete against states with far lower tax burdens.”
The conservative Massachusetts Fiscal Alliance echoed those sentiments, calling for additional tax relief in the final version of the bill.
“The tax bill was originally touted as a way to help Massachusetts remain competitive following the news of massive outflows of people and wealth from the state which was set to be exacerbated by the passage of the income surtax amendment,” MassFiscal spokesman Paul Craney said. “Yet at each stage in the legislative process, it has become increasingly watered down to the point where the Senate plan is barely even a gesture.”
Debate on the bill gets underway in the Senate on Thursday, with lawmakers expected to weed through about 70 proposed amendments to the package before holding a final vote on the measure.
If the Senate’s bill is approved, the House and Senate will name a six-member conference committee to work out differences between the two versions of the tax relief package.
The Senate’s three-member GOP minority — led by Senate Minority Leader Bruce Tarr, R-Gloucester — has filed several amendments to the package, including proposals to cut the business profit tax and expand the estate tax reforms, but they face long odds in the Democratic-controlled chamber.
“Taxpayers have waited a long time for real tax relief,” Tarr said in a statement. “There remains a vital need for structural and permanent tax cuts and reforms and now is the time to deliver that help.”
This post is a part of Old Colony Law’s Estate Tax Updates.