BOSTON – Gov. Maura Healey wants to cut corporate taxes as part of a broader effort to attract new investment and improve the state’s competitiveness.
Healey’s tax break plan, filed with her $55.5 billion budget proposal, calls for a cut in the state’s short-term capital gains tax from 12% to 5%, which she says would save about 150,000 taxpayers subject to the levy. would relieve.
The proposal is part of a broader tax package that, if approved by lawmakers, would adjust income tax laws to increase deductions for low-income renters, provide housing and childcare tax credits, and overhaul inheritance taxes.
“We know some of the challenges we’re facing right now: An unprecedented housing crisis, skyrocketing costs for quality childcare, businesses not finding workers with the skills they need to grow,” Healey said in a speech to business leaders last Week. “The good news is that together we can fix this.”
Healey administration officials argue that a simplified capital gains structure that “aligns” the short-term capital gains tax with the long-term capital gains tax of 5% would make Massachusetts less of a corporate tax outlier.
Under current law, capital gains on assets held for less than a year are taxed at 12%, while other forms of income are taxed at 5%. Only two other states tax short-term capital gains at a higher rate.
But Healey’s plan is being pushed back on both sides of the issue as progressive groups blast tax breaks and corporate groups demand more tax breaks.
RaiseUp Massachusetts, a coalition of labor unions, community groups and faith-based organizations pushing for the new millionaire tax, said Healey’s plan to lower the tax rate on short-term capital gains would “reward wealthy day traders and real estate speculators for their risky finance maneuvers.”
The group said the tax cut and Healey’s proposal to revise the estate tax would “bring a tremendous cash flow to the wealthiest members of our society while also robbing the state of hundreds of millions of dollars in much-needed revenue.”
“A permanent billion-dollar tax cut, including these two incredibly backward measures, would undermine those goals and put the state at risk of catastrophic budget cuts in the years to come,” the coalition said.
The left-leaning Massachusetts Budget and Policy Center said Healey’s proposed capital gains tax cut would “contradict the intent to increase taxes on higher incomes and impair our ability to fund other investments in the future.”
“Significant tax cuts for the wealthy undermine our ability as a Commonwealth to make the bolder public investments 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’ rates,” but added that the reduction was “only comparable to, not better than, other states’ approach.” .
The council said the tax package “is beginning to address Massachusetts’ high cost of living and our status as a national tax outlier, but it doesn’t go far enough to improve our competitive position relative to other states.”
Massachusetts is among most states where investors must pay capital gains taxes on income derived from gains on the sale of investments or assets. Duties range from a low 3% in Pennsylvania to 13.3% in California.
The federal government also taxes long-term capital gains at rates between 15% and 20%, depending on filing status and income.
At least eight states, including New Hampshire, don’t tax capital gains, according to the Tax Foundation. The Granite State, which has no income tax, taxes capital gains, including interest and dividends from investments.
Healey’s proposed rate cut would cost the state about $117 million in the next fiscal year, but the Healey administration said it would not affect other budget items.
However, the loss of tax revenue would mean less money for the state reserve or “rainy day” fund, which is funded by investment income.
The governor’s budget is currently under review by the House Ways and Means Committee, which will submit its own spending plan. The fiscal year begins on July 1st.
Christian M. Wade reports on the Massachusetts Statehouse for the North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.
