BOSTON (State House News Service) — Anticipating that a 1980s law that's largely been relegated to the depths of Beacon Hill memories will be triggered by the fiscal year 2022 surplus, the Baker administration is preparing to make "north of $2.5 billion" in tax rebates available to Massachusetts residents later this year.
With a historic surplus expected from the budget year that ended June 30, Democrats in the Legislature are pursuing about $500 million in permanent annual tax breaks and credits and another $500 million in one-time, $250 payments to middle-income earners.
But the idea that a 1986 voter law that set a cap on state tax revenue growth and requires the overage to be returned to taxpayers could be triggered for just the second time ever has the governor feeling confident that Bay Staters will ultimately get even more relief. CommonWealth Magazine was first to report on the possibility.
"Based on the performance of our economy and our tax collections for the last fiscal year, we do believe there'll be a significant return to the taxpayers, according to existing state law, sometime later this year," Gov. Charlie Baker said Thursday morning. He added, "We think the number's probably north of $2.5 billion that would be in tax rebates to the people in Massachusetts."
The final determination of how much state tax revenue should be returned is due from Auditor Suzanne Bump's office by Sept. 20.
Under terms of the tax cap referendum sponsored by the Citizens for Limited Taxation and approved by the electorate in 1986, if revenues grow by more than the growth in wages and salaries, the excess money must be returned to taxpayers. Once the auditor determines that the state did collect tax revenue above and beyond the cap, the Department of Revenue "shall take all the necessary action to effectuate a tax credit equal to the total amount of such excess," the auditor's office said.
The law states that the auditor's determination "shall result in a credit equal to the total amount of such excess" and that the credit "shall be applied to the then current personal income tax liability of all taxpayers on a proportional basis to the personal income tax liability incurred by all taxpayers in the immediately preceding taxable year."
But the law has only ever been triggered in 1987, when collections exceed the cap by $29.22 million and taxpayers claimed almost $17 million of it, and budget chief Michael Heffernan said his team is working to clarify exactly how the rebates or credits would work.
"We're looking at what's the quickest and most efficient way to get that money back to the taxpayers," the secretary of administration and finance said.
Through the middle of June, the final month of fiscal 2022, Massachusetts had collected $39.199 billion in tax revenue for fiscal year 2022, enough that the Massachusetts Taxpayers Foundation estimated a surplus in the neighborhood of $3.5 billion. DOR has not yet reported final fiscal year-end revenue figures, or figures covering the full month of June, a big month for receipts.
Written by Colin Young/SHNS.