Massachusetts House of Representatives passed an economic development bill, which utilizes American Rescue Plan Act (ARPA), Fiscal Year 2022 (FY22) surplus funds, and bonds to make significant investments across several vital sectors of the economy, and to give back to low and middle-income residents in Massachusetts by providing one-time rebates and significant tax relief beginning in 2023. Funded at $4.2 billion, the legislation addresses disparities exacerbated by the COVID-19 pandemic through one-time investments in health and human services, the environment and climate mitigation, economic development, housing, and food insecurity.
“As Massachusetts residents continue to face severe inflation and economic uncertainty, I’m proud of the action taken by the House today that will provide low and middle-class taxpayers with much needed financial relief,” said House Speaker Ronald J. Mariano (D-Quincy). “Included in this legislation are several significant tax relief proposals, over $2.5 billion worth of one-time industry targeted investments, economic relief rebates for qualifying taxpayers, and a newly established source of revenue to fund the state’s early education and care system. These are vital forms of real, tangible economic relief."
“This well-rounded spending package makes significant, targeted investments will help support major sectors of our economy and make us more competitive with other states” said Representative Aaron Michlewitz (D-Boston), Chair of the House Committee on Ways & Means. “By making these investments and offering much needed tax relief to our middle-class constituents, we will be giving a much-needed boost to our residents who were hit the hardest by this pandemic.”
Taxpayer Energy & Economic Relief Fund
Following $500 million worth of premium pay bonuses for low-income workers that were issued in March and June of 2022 under the Legislature’s Essential Employee Premium Pay Program, the economic development bill passed today by the House includes one-time rebates of $250 for a taxpayer who files an individual return, and $500 for married taxpayers who file joint returns that will be issued before September 30, 2022. These rebates are expected to be issued to about two million Massachusetts residents who reported earning between $38,000 and $100,000 for individual filers, and between $38,000 and $150,000 for joint filers in 2021. The one-time rebates will not be subject to state’s personal income tax.
Permanent tax changes
The bill passed today makes significant changes to the Massachusetts tax code to provide structural relief to millions of residents across all income levels. These include:
· Increasing the Child and Dependent Care Credit from $180 per child to $310 per child, as well as eliminating the current cap of $360 for two or more children. This is expected to impact over 700,000 families.
· Increasing the Earned Income Tax Credit (EITC) from 30 percent to 40 percent of the federal credit. This is expected to impact about 396,000 taxpayers with incomes under $57,000.
· Increasing the Senior Circuit Breaker Tax Credit from $750 to $1,755. Currently, the Department of Revenue caps this credit at $1,170 due to cost-of-living adjustments over the $750 set in statute. Increasing it to $1,755 in statute is expected to impact over 100,000 taxpayers who own or rent residential property in Massachusetts as their principal residence.
· Increasing the rental deduction cap from $3,000 to $4,000. This is expected to impact about 881,000 taxpayers.
· Increasing the estate tax threshold from $1 million to $2 million and eliminating the “cliff” effect which would tax just the value of the estate that exceeds $2 million, not the entire estate. This is expected to impact about 2,500 taxpayers.
In an effort to raise revenue for early education and care, Representatives adopted an amendment that would allow the Massachusetts Lottery to sell some of its products online. The new revenue collected from online sales will go to prizes for winners, for the administration and operations of the lottery, and to fund an Early Education and Care Fund. Revenue for the new Early Education and Care Fund would be used to provide long-term stability and develop a sustainable system for high-quality and affordable care for families. This will include significant funding for subsidy reimbursement rates, workforce compensation rate increases, and support for state-wide early education and care initiatives, among others. The amendment requires the Massachusetts Lottery to use age verification measures to ensure that any users are over the age of 18.
One-time targeted investments
Health and Human Services
· $350 million for financially strained hospitals
· $165 million for nursing facilities workforce needs
· $100 million for supplemental rates for human services providers
· $80 million for community health centers
· $30 million to support Rest Homes across the Commonwealth
· $25 million to address food insecurity across the Commonwealth
· $15 million for grants to reproductive rights providers for security, workforce, and educational needs
· $15 million for grants to non-profits and community-based organizations to address gun violence and gun violence related trauma
· $175 million for state parks and recreational facilities upgrades, with $25 million for communities of color
· $125 million for environmental justice communities
· $100 million for marine port development
· $100 million for the Clean Water Trust Fund
· $300 million for the Unemployment Insurance Trust Fund
· $125 million for small businesses, with $75 million for minority-owned businesses
· $50 million for broadband investments in underserved communities
· $75 million in grants to hotels across the Commonwealth who saw financial loses during the pandemic
· $100 million for the Affordable Housing Trust Fund
· $75 million for minority-owned housing development
The House bill also includes $1.26 billion in bond allocations to greater support the economic growth and stability of the Commonwealth. Highlights include:
· $400 million for the MassWorks Infrastructure Competitive grant program to support municipalities and other public entities support and accelerate housing production
· $200 million for the Technology Matching Grants program that supports various organizations to help compete for federal innovation grants
· $95 million for ADA compliance projects
· $73 million for the Housing Stabilization and Investment fund
The bill passed the House of Representatives 154-0 and now goes to the Senate for their consideration.