Massachusetts tax cut package gets key nod despite revenue shortfall

Massachusetts state senators intend to leave Gov. Maura Healey’s $748 billion tax cut package intact in their redrafted budget proposal despite falling state revenues.

The fate of Healey’s tax-relief plan, which features a mix of tax rate cuts and policy changes including an expanded child and family tax credit, and was a centerpiece of her $55.5 billion budget proposal for fiscal 2024, was thrown into question last week after state tax collections for April recorded a year-over-year decrease of 31%.

While the state has already cleared a baseline budget for fiscal 2024, supplemental spending proposals were sectioned off for further debate under a deal struck to avoid a government shutdown in April.

The revenue report came roughly a week prior to the release of a redrafted spending plan from the state Senate, due on Tuesday.

Despite calls from some of the governor’s legislative opponents to suspend or shrink the proposal, the tax package “is a go,” Democratic Senator and chair of the State Senate Ways and Means Committee, Patrick O’Connor, said.

“There’s no sugarcoating the revenue decline,” O’Connor said, “but as far as numbers go for the month of April, we should be able to move forward with the tax package that the governor presented. The House already passed it.”

In April, Massachusetts’ House passed a $659 million tax cut bill that was a slightly trimmed-down version of Healy’s plan.

Historically, April is “the single largest month for collections,” Massachusetts Department of Revenue Commissioner Geoffrey Snyder said in a statement, adding that the decrease in April collections is largely driven by “the decline in non-withholding income tax is mostly attributable to a decrease in capital gain tax collections and an increase in PTE members applying credits to reduce their tax payments.”

O’Connor said “internal discussions are being” had about “whether or not this was an outlier due to the capital gains tax or pass-through entities tax.”

While lawmakers will consult economists and other professionals in figuring it out, the committee still believed Massachusetts was “well positioned” to deal with the lost revenue from the tax cuts, estimated to be $1.1 billion over the next two years, he said.

“We’ve prepared any sort of hit that we might be able to take in sort of where the economy lands, post COVID, so we’re very well positioned in Massachusetts to continue to move forward with this tax package,” O’Connor said.

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