Friedman, Senate Colleagues Pass Progressive Tax Relief Legislation

Bill Provides Significant Housing, Dependent Care, and Estate Tax Assistance

(BOSTON– 6/15/23) The Massachusetts Senate approved on Thursday a $590 million Tax Relief bill which delivers support to low- and middle-income earners and chips away at the headwinds that threaten Massachusetts’ competitiveness. Focusing on providing relief to residents across Massachusetts while upholding fiscal responsibility, the Senate’s tax relief package proposes relief to renters, seniors, and parents struggling with high early education costs while also increasing much-needed housing production. With the recent passage of the Fiscal Year 2024 budget last month, the Commonwealth is now poised to secure and strengthen its economic foundation to weather future uncertainty.

“The tax relief proposal passed in the Senate demonstrates our chamber’s commitment to progressive tax relief that improves the quality of life for the people of the Commonwealth, not corporations,” said Senator Friedman, Vice Chair of the Senate Committee on Ways and Means. “Living in the Greater Boston area, I know the cost of housing and childcare continues to be a persistent issue for our low- and middle-income residents and young residents and families. The Senate’s proposal addresses this by making meaningful and sustainable reforms so people can afford to come and stay in the Commonwealth. This tax plan is a good start and will have a demonstrable benefit on the communities of the 4th Middlesex district and I thank my Senate colleagues for their deliberate and thoughtful work.”

This package includes a variety of initiatives as tax relief for the residents of Massachusetts. The bill:

  • Increases the Earned Income Tax Credit (EITC), which provides critical support to working families, from 30 percent to 40 percent of the federal credit;
  • Merges existing credits into a new and enhanced Child and Dependent Tax Credit (CDTC), increases the amount of the credit from $180 to $310 per child/dependent, and eliminates the current cap of two children/dependents;
  • Increases the statewide cap for the Housing Development Incentive Program (HDIP) from $10 million to $57 million on a one-time basis and then to $30 million annually;
  • Increases the cap on the rental deduction from $3,000 to $4,000;
  • Raises annual authorization of the Low Income Housing Tax Credit, which directly supports the production of affordable housing units across the Commonwealth, from $40 million to $60 million;
  • Doubles the maximum senior circuit breaker credit, which supports elderly residents who struggle with high housing costs, from $1,200 to $2,400;
  • Excludes homes valued at under $2 million from the Estate Tax and eliminates the “cliff effect” by allowing a uniform credit of $99,600 for all estates;
  • Triples the maximum credit under the Title V Tax Credit, which supports families who must replace failed septic systems, from $6,000 to $18,000, and lifts the amount claimable to $4,000 per year;
  • Increases the statewide cap for the Dairy Tax credit from $6 million to $8 million;
  • Expands eligible occupations for the Apprenticeship Tax Credit;
  • Doubles the credit for lead paint abatement to $3,000 for full abatement and $1,000 for partial abatement; and
  • Expands the types of alcoholic drinks which qualify for a lower tax rate as part of the cider tax.

Notably, this legislation ensures that student loan payment assistance offered by employers will not be treated as taxable compensation. The bill also adds regional transit fares and bike commuter expenses to the allowable commuter expenses eligible for favorable tax status.

To encourage affordable housing, the bill gives municipalities the option of adopting a local property tax exemption for real estate that is rented to a person below a certain area-dependent income level.

Additionally, the bill also directs the following studies:

  • A study by the Executive Office of Administration and Finance on the feasibility of making advance quarterly payments of the Child and Dependent Tax Credit; and
  • A study by the Department of Revenue on the efficacy of an additional, elective entity-level tax of up to 4 percent on a portion of qualified taxable income in the Commonwealth, coupled with a refundable credit, for eligible pass-through entities.

Different versions of this legislation having passed the Senate and the House of Representatives, a conference committee will now be appointed to resolve differences between the two bills.