Council in the News
Healey’s plans to cut business tax faces pushback
The Eagle Tribune | March 8, 2023
By Christane M. Wade | State House Reporter
BOSTON — Gov. Maura Healey wants to cut business taxes as part of a broader effort to attract new investment and improve the state’s competitiveness.
Healey’s tax-relief plan, filed along with her $55.5 billion budget proposal, calls for reducing the state’s short-term capital gains tax from 12% to 5%, which she said would provide relief for about 150,000 taxpayers subject to the levy.
The proposal is part of a broader tax package that would, if approved by the Legislature, adjust income-tax laws to boost deductions for low-income renters, provide tax credits for housing and child care, and overhaul the estate tax.
“We know some of the challenges that we’re confronting right now: an unprecedented housing crisis, skyrocketing costs for quality child-care, companies unable to find workers with the skills they need to grow,” Healey said in a speech to business leaders last week. “The good news is we can, working together, fix that.”
Healey administration officials argue that a simplified capital gains structure, which “aligns” the short-term capital gains tax with long-term capital gains levy at 5%, would make Massachusetts less of an outlier on corporate taxation.
Under current law, capital gains on assets held for less than a year are taxed at 12% while other forms of individual income or texted the 5% rate. Only two other states tax short term capital gains at a higher rate.
But Healey’s plan is facing pushback from both sides of the issue with progressive groups blasting the tax breaks and business groups calling from more tax relief.
RaiseUp Massachusetts, a coalition of labor unions, community groups and faith organizations that pushed for the new millionaires’ tax, said Healey’s plan cut to the short-term capital gains tax rate would “reward wealthy day traders and real estate speculators for their risky financial maneuvering.”
The group said the tax cut, and Healey’s proposal to overhaul the estate tax, would “deliver an enormous windfall to the richest members of our society, while depriving the state of hundreds of millions of dollars in much-needed revenues.”
“A billion-dollar permanent tax cut, including these two incredibly regressive policies, would undermine those goals while placing the state at risk for catastrophic budget cuts in future years,” the coalition said.
The left-leaning Massachusetts Budget and Policy Center said Healey’s proposed capital gains tax cut would “go against the intent of raising taxes on higher incomes, and harm our ability to fund other investments in the future.”
“Substantial tax cuts to the wealthy undermine our ability as a Commonwealth to make the bolder public investments that this moment calls for,” the group said in a statement.
The Massachusetts High Technology Council issued a statement saying Healey’s proposal would bring short-term capital gains rates “more in line with other states” but added that the reduction would be “merely comparable to, not better than, the approach other states take.”
The council said the tax package “begins to address the high cost of living in Massachusetts and our status as a national outlier on taxes, but it does not go far enough to improve our competitive position relative to other states.”
Massachusetts is among a majority of states that requires investors to pay capital gains taxes on income they make as a profit from selling investments or assets. The levies range from a low of 3% in Pennsylvania to California’s 13.3% rate.
The federal government also taxes long-term capital gains at rates ranging from 15% to 20%, depending on filing status and income.
At least eight states, including New Hampshire, don’t tax capital gains, according to the the Tax Foundation. The Granite State, which doesn’t have an income tax, does tax investment income, including interest and dividends from investments.
Healey’s proposed reduction of the rate would cost the state about $117 million in the next fiscal year, but the Healey administration said it won’t impact other items in the budget.
The loss of tax revenue would, however, mean less money for the state’s reserve or ‘rainy day’ fund, which is funded by capital gains proceeds.
The governor’s budget is currently being reviewed by the House Ways and Means Committee, which will file its own spending plan. The fiscal year begins July 1.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at firstname.lastname@example.org.