2022-02-22 00:00:00 - Joint Committee on Revenue

2022-02-22 00:00:00 - Joint Committee on Revenue





SHOW NON-ESSENTIAL DIALOGUE


GOVERNOR BAKER - HB 4361 - HB 4362 - thank you very much Mr. Chairman thanks very much to both. Chairman, Hinds and the Chairman, Cusack and to the other members of the committee who are here both virtually and in person for this opportunity to speak today about the tax relief proposal that we filed in January alongside our house to budget recommendation in a time of rising costs due to inflation. This proposal would allow parents, low income families and seniors to keep more of their hard earned tax dollars. They will put more money into the pockets of people and communities who have been hardest hit83 by the economic disruptions of the past two years and these are not partisan ideas. In fact, several legislators of both parties have proposed similar ideas to those included in our legislation, for example, on rental deduction.

There are proposals from representatives Lipper-Garabedian Cronin and Consalvo Representative Scanlon has a proposal on the senior circuit breaker and there are bills that have been filed by legislators on110 the estate tax, including bills by representatives, Dooley Shawn and Fernandez and Senator Cyr There are also multiple bills that create childcare tax credits or120 expand the existing child care tax credit system in Massachusetts. Before I get into the details of our riveting tax relief proposal, I want to start by updating you on the commonwealth's current physical picture. The administration's first priority in 2015 was bringing the budget into structural balance and since then we've worked hard with you and your colleagues in the legislature to consistently deliver billion dollar surpluses, demonstrating the resilience of our economy even149 through the worst of the COVID-19 pandemic.

The balance of the commonwealth stabilization fund has risen significantly and steadily, especially in recent years. It's currently sitting at an all-time high balance of $4.6 billion $2 billion 23. All of this work which we have done alongside our partners in the legislature makes the commonwealth well prepared to deal with future crises. We've been able to make these large contributions to our reserves while expanding services for our residents across all areas of government over the past several years and we have made significant investments in our people, our schools and our communities, including the landmark student opportunity act, addiction treatment and behavioral health care housing and rental assistance, climate change transportation and so much more. Along the way, we've finally seen Massachusetts income tax make its way back to 5% from the 5.15 it had previously and that all happened on the back of an extraordinarily strong economy.

Our Fiscal Year 23 budget proposal continues to invest in key priorities with a focus on expanding services and areas of need exacerbated by the pandemic. Our proposed tax cuts would further help those across Massachusetts who are struggling to make ends meet due to the235 impacts of COVID over the past two years. And they would work toward helping maintain and help grow our economy in the future by improving Massachusetts competitive position and making it a more tax friendly state overall Total, our comprehensive tax relief proposal would bring roughly $700 million dollars in savings to our residents each year. Not only can we afford this tax relief proposal, we believe it's time to give Massachusetts families back some of the tax revenue that they created through their hard work. The past two years have been very difficult ones for families. They face prolonged economic instability and rising cross across the board due275 to inflation and supply chain disruptions.

We're proud to propose these cuts that will lessen their tax burden, allowing them to keep more money in their pockets to put it towards their necessities like287 child care housing and transportation. We're proposing an increase in the dependent care credit, doubling each of the existing refundable credits that help people pay for the cost of caring for their children and other dependents in their homes. Where the current credits ranged from $180 to $480, depending on the number of dependents and other qualifications. Under our plan, these would increase to a minimum credit of $360 and a maximum credit of $960. This change316 would allow 700,000 working families to keep an estimate estimated total of $167 million dollars each year. We're also proposing to tax relief measures to help individuals across the state that are feeling the pressure of increased housing costs. Current rental deduction from income tax is capped at $3,000.

We want to increase that cap to $5,000 for the more than 880,000341 renters across the state. This increase was reduced taxes owed by these renters, who we all know have seen a significant increase in their cost of housing by an estimated total of $77 million dollars a year. We also propose to double the maximum senior circuit breaker credit. And if we do this, can we come up with a better name for this one, which is a credit that helps reduce taxes owned by our low income seniors whether they rent or own their home. The credit rises with inflation, but using 2021 figures, this change would have increased the maximum credit to $2,340 versus the current maximum credit of $1770 that's currently available. This proposal would lower the tax burden for more than 100,000 low income seniors, saving them an estimated total of around $60 million dollars each year.

And our bill would eliminate income taxes for the lowest paid 230,000 taxpayers in the Commonwealth by increasing income thresholds for no tax status to match federal thresholds. With more of our low-income workers relieved of their income tax obligations. They will be able to use their earnings to413 pay for the necessities that they need for themselves and their families. I think we417 can all agree. We've asked a lot of the people in Massachusetts throughout this pandemic and all of these tax cuts are targeted, much needed breaks that will allow them to retain their hard earned money and spend on the things that they and their families require. The pandemic is also ushered in a new435 reality where people have a lot more flexibility about where they live and where they work. We can't just close our eyes and pretend that we're not competing with other states because we are.

Instead, we need to think strategically about the commonwealth, competitive position in the country and how we can maintain our strong economy a large part of which relies on ensuring that our residents continue to live here. Our proposal would address two areas where Massachusetts is a clear outlier relative to almost all other states in terms of tax policy. First, we propose to align the short term470 capital gains tax rate with other income tax rates, which is the way that short term capital gains are treated in most other states, short term capital gains and gains from the sale of assets held for less than a year. And this tax applies to people like casual investors, many of whom are not wealthy. In fact, 20% of the people in Massachusetts who pay short term capital gains taxes Are in the middle and bottom to income quartile with less than $58,000 in net adjusted gross income.

Of the 51 states, of the504 41 states plus Washington, D. C. The tax income, all the Massachusetts tax capital gains at a rate that's no higher than the tax rate on ordinary income, making us markedly different and uncompetitive. In comparison, our proposal would bring the rate down from 12% 1 of the highest in the country, to 5%, consistent with our regular income tax at the current 12% tax, 12% rate. This tax acts like a penalty making Massachusetts particularly unfriendly to at least 60,000 middle-income taxpayers who are hit with it each year, who are trying to make responsible investments, to support themselves and their family’s future. Further updating the short term capital gains rate, the more competitive 5% is likely to draw in certain businesses and individual investors from outside Massachusetts and help retain those who are already here. We've also proposed two changes to update Massachusetts state tax to make the commonwealth again, a more competitive place for families to stay over multiple generations.

The first proposed change would double the current tax threshold from $1 million to $2 million. The second would eliminate the current cliff effect, that taxes the full amount of the estate, including the amount below the threshold. And under our proposal, only the amount above the threshold would be subject to the tax Massachusetts is one of only 17 states plus the District of Columbia with some form of an estate for inheritance tax. And we're tied with Oregon for the least competitive tax threshold, that $1-million-dollar number. Although even Oregon's tax doesn't have the cliff effect that I described before. This makes it easier for residents to justify moving to more tax friendly states where their children won't be stuck with large tax bills to pay upon their death. When this out migration happens, it has negative impacts on the commonwealth's economy and shifts elsewhere. Years of tax revenue that supports the operating budget622 and the many critical services and investments of funds.

I think that's one of the main reason why so many legislators are interested in doing something about this. We believe it's important to the commonwealth long term competitiveness to bring our state tax more in line with other states and the changes we have proposed to both the tax structure and the641 threshold will go a long way toward making Massachusetts a place that our residents will want to remain at throughout their lives. Our comprehensive package, as I said before, we bring roughly $700 million dollars in savings store residents each year. And our budget plan assumes that this tax relief can be done without the need to cut661 services for our residents. We've also included a $250 million dollars’ one-time supplemental pension transfer in our budget because we can't afford it. $700 million 2% of the tax base. An amount that in the context of our strong economic foundations and sustainable structural balanced budget is an affordable and responsible level of investment.

And I want to683 thank you again for your time and attention. I especially want to thank you for holding this hearing so quickly after we filed this legislation and for your consideration of these tax proposals that we've put forward. As you know, we're very appreciative for the partnership we have between our administration and the House and the Senate on so many fiscal issues, especially over the course of the past several years, our collaboration and commitment to our fiscal responsibility over seven years is a big part of what made it possible for us to get through the pandemic such strong physical shape. We're eager to roll these tax cuts out immediately to benefit the hundreds of thousands of are most in need residents who would benefit from many of these. And we look forward to working with you on these measures again. I want to thank you for the chance to testify and on that and I will now pass it over to Secretary Heffernan for a really exciting part of the presentation where he talks about a whole series of Tax Administration modernisation initiatives that I barely begin to understand with that.

SECRETARY HEFFERNAN - EXECUTIVE OFFICE OF ADMINISTRATION AND FINANCE -HB 4361 - HB 4362 -

4362



4362 - Thank

Chair Hinds and chair Cusack and members of the committee for inviting me here we're to discuss baker, the baker police administrations, tax proposals as the768 governor discussed, Massachusetts is in a strong fiscal position with historic levels of reserves and a structurally balanced operating budget achieved through seven years of fiscally responsible governance and collaboration collaboration between the baker administration and the Legislature. We feel strongly that it is time to propose785 changes that will allow our residents in need to keep more of their money for necessities like childcare, housing and food. While keeping Massachusetts more competitive. The governor reviewed are proposed tax reforms797 in detail. So I will briefly describe the other tax related changes which I would describe primarily as administrative updates.

These were proposed alongside and within the FY23 house to budget. But before I do that, I do want to provide a quick update regarding individual tax filers. As815 discussed, we propose raising the no income tax threshold an initiative that will allow 231,000 hardworking folks to keep more money in their pocket. Raising this threshold will also benefit roughly 245,000 additional taxpayers through the limited income credit, which decreases the tax liability of low income taxpayers who are just above the no tax status839 threshold. Those already eligible will see their limited income credit increase and others will become newly eligible for this credit If you factor in the low-income credit as well as our proposal to raise the no tax threshold, it accounts for a total of about $89 million dollars kept in the in the pockets of nearly half a million hardworking859 taxpayers in their families. Let me now transition to that exciting tax Administration legislation, the governor referred to.

The amendments proposed in this bill will make filing and paying taxes easier clearer and quicker874 for taxpayers by increasing DOR’s efficiency and consistency in administering taxes and clarifying confusing and our outdated statutory provisions. There is no fiscal impact associated with this bill. The proposal aims to improve Tax administration efficiency and inconsistency by updating terminology and processes laid out in DOR 's Tax Administration statute to reflect their current practices and systems. This includes an amendment that would streamline the amended return process to better incorporate efficiencies made possible by the functionality of DOR’s, accounting and reporting system genesis. This change will align the statute with automated process for reviewing amended returns consistent with913 the process for original914 returns.

We also included measures to allow for the creation of a centralized lean registry to improve DOR’s Management of these tax leads instead of proposed amendments, focuses specifically on increasing consistency and uniformity in various areas of Tax Administration. To ensure fairness and clarify areas of ambiguity ambiguity. For instance, the bill includes a proposal that would align the tax filing requirements for ES corporation members of combined groups with other corporate members of combined groups subject to DOR’s income tax filing requirements. Similarly, where prior legislation repealed the prohibition on vendors advertising that the vendor would assume the cost of sales tax. This bill would propose to repeal the corresponding prohibition on vendors advertising that they will assume use tax. This will provide consistency between sales and use tax regarding advertising, and this bill will ensure that reporting compliance for marijuana vendors will create uniformity with all other trustee taxpayers.

This bill973 would also modernise aspects of the Tax Administration statute to fix provisions that have proven to be confusing for taxpayers and practitioners alike. For example, the Tax Administration Statute currently cross references the version of the federal tax code in effect as of July 1 1983. In conformity with such outdated versions of the federal tax rules may result in misapplication of the law and unintended consequences. This bill would amend the cross reference to site 2022 federal code. It would also rectify the process for appealing are initiated changes to tax returns. The current statute provides for multiple options for corrections and adjustments and is often confusing for taxpayers. The1014 proposed amendment would provide taxpayers with clear, well defined avenues for the appeals process. The bill also includes a handful of other highly technical amendments, aligned with the core goals of improving DOR efficiency and consistency in making needed corrections and clarifications to the Tax administration statute.

It is essential that the commonwealth administers state taxes fairly and efficiently and that the rules governing tax administration are clear and up to date. The amendments were proposed with will better equip DOR to do so with superior administration tools and put forward statutory updates. That will in turn facilitate a better experience for1048 taxpayers and the many practitioners who navigate the tax system on a regular basis. We look forward to working with you to pass this important these important changes in this bill that will enable lasting improvements to the tax processes for the benefit of the commonwealth taxpayers Consistent with the previous years. We have also included tax-related changes within the House two budget. These were focused on both statutory cleanup and modernization.

The measures that we've proposed in house to outside sections would have an estimated positive revenue impact net revenue impact of $27 million 23 And would be accounted fully encountered for within the fiscal 23 house to budget and a positive net revenue impact of 35 million in the out years. First, we proposed to update conformity with respect to the commonwealth personal income tax code, to the 2022 version of the federal Internal Revenue code, with the exception of the business income deduction for pass through entities. As you are aware many of the nuts and bolts of our tax systems linked to federal definitions and we use this basic set of building blocks to create state level tax policy with respect to taxable income deductions, credits and other major features of our tax law. Our personal income tax rules are currently aligned with the federal rules as of tax year 2005.

Our proposal would update the conformity date to 2022. This will bring us in line with other states reduce tax complexity for tax complexity for taxpayers and the many practitioners who regularly interact with this tax system and reduce compliance costs for individuals and businesses with liabilities in multiple states, This conformity change will result in an overall increase of $42 million $23 and $50 million dollars in the out1153 year due to a slight flag in the time it takes for some provisions to take full effect as well as the growth in the tax base. We also filed to widen eligibility for the research tax credit to include financial institutions going forward. This tax credit incentivizes companies to attract and retain highly skilled employees and to invest in research and development that will help advance the industries across Massachusetts. Financial institutions would be eligible for the tax credit as of January 1 2022. This proposal comes1186 with a cost of $15 million dollars annually.

Additionally, we propose the controlled substances act under the general laws Chapter 64K, which is currently not enforced due to the double jeopardy1196 issues that prevents double jeopardy as many of you know, refers to a second prosecution for the same criminal1203 offense and is barred under the federal constitutional framework. And finally we filed and we filed an amendment that removes ambiguity around the tax ability of remote software as tangible personal property. This change is supported by the Massachusetts Supreme Court's ruling decision against in1221 Citrix systems versus the Commissioner of Revenue. There are no estimated fiscal impacts associated with this amount. The administration previously filed for this change in FY22 governors household budget proposal. With that I will wrap up finally, and with that, I want to1234 thank you again for your time and attention today and for your continued partnership. Look forward to collaborating with you to pass these tax bills as well as a responsible 23 budget that respects our taxpayers. Both A&F. And DOR. Happy to follow up with any of your topics raised today and I think now we're happy to take your questions.

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REP SOTER - Thank you Secretary. Thank you for being here. Oh truly excited about this. Right yeah thank
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it. Say that two years ago. Yeah under control curve here sometimes it's easier to turn off. We turn this economy back on. I be ready for fear because of and I want to commend you focusing in income level the tax rate that has been to promote work.1324 That's what this inclusion. Small workers for people to get back to work comfortable about getting back to work. Understanding that is against the
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flooded with cash. I always say the the government is not in the business of showing
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called the taxpayers’ dollars. And when we have this
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cabbage to give it back to those people, they kept the economy going two years without them. I don't help all of
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numbers. Oh yeah. One of the biggest I know the biggest elephant in the room is governor. The little question getting these words.

BAKER - So first of1386 all, thank you for your question, representative and and thank you for your hard work on behalf of your constituents throughout this pandemic. I I've said this to a number of you. I don't know if I have had a chance1399 to say it publicly, but um I know how many calls and how many um zoom meetings and how many local gatherings virtually you have all conducted over the course of the past two years. one of the things that it's absolutely true about the role of the legislator is that that role is normally mostly about legislating and hearings and that type of thing. And that's the public part of the job that most people know about. And then there's the secondary job which is called helping constituents solve problems, figure things out, deal with issues and challenges.

And there's no question1444 that that whole thing1445 got turned completely on its head at the beginning of the pandemic and at various points along the way. And um and while I'm thrilled to be sitting here in front of you all inside the Statehouse hearing in a reopened Statehouse, I am well aware of how much work you all have been doing on behalf of the people you served over the course Over the past two years, a lot of the people that we talked about in our tax testimony um are nowhere near the kind of financial condition coming out of this pandemic as the commonwealth as an entity is. And I start with that if you think about the impact this has had on families, especially on lower income workers in Massachusetts, they're by far the people who have been hit hardest.

And I think the opportunity, we have done many things with your help, the support folks over the course of the past couple of years as we've gone through this. But I think there's no question that at this point in time, um we we ought to be giving something back to the1506 people of Massachusetts and with the growth rate we have and withholding the growth rate we have in sales, the growth rate, we have capital gains taxes, the sort of energy we see in an economy that is still 200,000 people below the rate of employment we had when this1522 all happened in 2019, which I believe means we have tremendous room for growth going forward. Um yes, this is eminently.

SOTER - Chair, I just add I just want to have thank you to both chairs and their staff things can go right away from that distance because I just wanted to say probably first The chair is on is comfortable with a little bit two years’ step. Thank you.
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SEN COLLINS - Thank you. Thank you. The strong1586 collaboration Legislature committee states, she and and to the consumer’s world of the businesses um last year. So it's an exciting time to be making these decisions depending on the other things so well, I don't personal, I want to ask clarification, Secretary of State.

HEFFERNAN - So we we are on scheduled to be fully funded by 3036,4 years. head of the Federal Rule of 2040. And we have a every three years to put together a schedule and that schedule increases at about 9% a year um in the FY23 budget, I think we're putting in approximately 3.7 billion up 329 million over fy 22. Um and we are also doing a onetime supplemental deposit of 250 million um above and beyond that straight line 3.7 billion again, underlying the affordability of the $700 million dollars in tax credits or tax tax cuts that were put before you. Um So it kind of underlines the affordability and the strength of the budget and the economy here in Massachusetts.

COLLINS - The best level?

HEFFERNAN - I don't have the number I can get back to you on that will get it from Paris the updated numbers for you.

BAKER - Um one thing about this,1684 um you know, having been the A and F secretary back in the dark ages um when um this pension schedule was developed, it's it's really been a thoroughly bipartisan initiative to fund to that schedule Since the 1990s and I and I know I speak for Mike and and his predecessors and I know I speak for my predecessors as well as well as the folks that preceded you all in these jobs. Um but when people build the budget, the first thing they put in their is what's the pension contribution followed by, you know, the debt service number and then you start building a budget passed, those two things. It is um It's a core belief, I think on the part of everybody who's been involved in building this schedule and delivering on it for the past 20 years. This is a this is a commitment that we've made to a lot of people who Made it to us in many cases for 20 and 301747 years. And I can't imagine a scenario where it isn't like first of mine every time

COLLINS - This hearing, that's it anymore.

HEFFERNAN - I think that's what we're doing with the supplemental.

COLLINS - Okay.

HEFFERNAN - We have a schedule that gets us four years early and we're putting a payment above and beyond that schedule. So I think that we are doing we are doing yes.

COLLINS - And you are and you all sent us the budget with a supplemental payment.

HEFFERNAN - Last year. All right.

BAKER - And there and there could I mean there is certainly an opportunity as we move towards the end of this year to take that up is one of the things we we work through as we get to the end of this fiscal year because we will have an opportunity if we choose to to do more in this fiscal year as well.

COLLINS - Iast the same. Mhm.

BAKER - This is one time, this would be a this would be1813 a permanent adjustment to the circuit breaker. And honestly in some respects, I think our view is the current circuit breaker has not kept up with what we would describe as the growth of the cost of living Massachusetts. And this is targeted to many of the most low income folks we have. These1829 properties have increased in value dramatically over the course of the past five or 6 years and this is the way to try and level the playing field a little bit with respect to the out of pocket

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SEN HINDS - Thank you. Chair Cusack Thank you. Governor. Secretary. Thank you to LIS. To the fact that we have a seamless transition to in person and virtual. Um An interesting insight into how our democracy might be able to work for the far corners of our commonwealth1855 being from one of those. Um And I maybe underscore your point governor that you know, we've had, this is our first hearing in person um since the pandemic started, but The the legislature has held over 200 informal and formal sessions since the pandemic began. This committee itself has had had nearly weekly hearings during December and January. Um so the work has been going on full steam ahead by necessity as you point out um about these bills, I would like to start with an appreciation for the two proposals that in particular help individuals and households that are clearly, you know, in recognition of being in need of a boost the senior circuit breaker and adjusting the gross income for tax status.

Uh You know, that's that goes some distance to helping folks and to be acknowledged. Um I1908 would like to ask a few specific questions on other proposals starting with the estate tax. I have a lot of sympathy for the need to adjust our our state tax. I come from a district with a lot of farmers and the number of times I'm approached by families who say, look, we're cash poor but asset rich and you're not helping us with a generational transfer with the current threshold where it is. Um and certainly we've heard in this committee from owners of two family homes anywhere near Boston. Um and some of1938 the issues that that we're focused on. Um some some are addressed by your proposal, but others as well. Is this going to be revenue neutral for the state or not? Do you apply a dramatically tiered structure to compensate for that if it's not going1950 to be revenue neutral?

What do we do about the cliff effect? And of course the threshold? Um we've we've deliberately extended in this committee, the the other estate bills, the state tax bills for consideration uh including after today. But here's here's one of my questions related to1967 the cliff effect. So this this proposal cost $231 million. Um and your approach to addressing the cliff effect cliff effect is to merely apply it above the new threshold. Um I think what I saw from DOR previously is that if you1983 merely raise the threshold it would cost 81 million. So there's kind of the delta in adjusting the cliff effect. And so I'm trying to figure out given the revenue impact which is significant. Um We we do have cash now, that's right, but we also have a lot of federal assistance now and we won't always. And2002 so did you consider other effects or other approaches to the cliff effect,2006 such as the tax credit above the threshold? Um And and those types of options and and why not go in that direction?

BAKER - Alright I might peak to this as well. I think from our point of view, this is the cleanest way and the most understandable way to approach it. And it was also fairly consistent with the other issue we were trying to deal with, which is the relatively significant un competitiveness of our current policy. Remember there are 33 states that don't have any estate for inheritance tax. And of those that do only one other one as a million dollars as its threshold. And that's organ and even they don't apply it to income earned under a million dollars. And when I talked to your colleagues, including senators here about this, um, I think many of them believe that we are losing money to people who are literally just re plat forming their lives2066 in a way that is not that complicated for them.

Um, and leaving Massachusetts as a resident and becoming a resident of other states that don't have this as they get older and we lose all of their income up until the time they die and, and then perhaps we even lose their family members that they choose to follow them. Um, I think doing a dynamic analysis of this is really complicated. It's almost, I mean, you should speak to this mike, but I think from our point of view, make it simple. Not all that, um, not all that different than the way many other states that we think of as competitors deal with this. Um, and then understand that there are going to be puts and takes associated with the impact over time on our, on our overall tax take. But in a $36 billion dollars’ tax take. Um, this is just not going to add up to a lot of money.

HEFFERNAN - Um, to find with what the governor is saying. I think that you, we did want it to be2130 clean and you want folks that are, you know, almost one in 10 single family homes in Massachusetts are approaching a million-dollar value. So many more folks in Massachusetts are going to get caught up in an estate tax if you lived in your home, if it's appreciated here in Massachusetts, an expensive state to live in and you've paid off your mortgage and you've got some2150 savings, it's very likely you'll trigger that million dollar and that like the short term capital gains is an unwanted penalty tax on folks that have worked hard to stay here. As the governor says that the governor said to us because in some ways this tax, this tax change and the state tax will pay for itself.

If people stay here and pay their 5% income tax and don't move to another state to avoid the estate tax to avoid higher, you know, higher taxation. We benefit by having them stay in the state longer and pay taxes longer and2180 the members of the community longer. Uh, and, and let me just one other comment, There is a lot of federal money around. Um, we have, there's 3.4 billion at the local level, 2.8 billion for the schools, as you know, with our, but we have 5.4 billion at the state level. Um, we also had several billion that we put aside of state money2202 last year when we talk about the operating budget and these and these tax reduction proposals. This is all ongoing operating money. The federal money is not intermixed in the discussion we're having today, which again comes back to the affordability, We were able to fully fund the budget.

Um kept a lot of the expansion that we thought was really good policy through the pandemic. Um we were able to make that $250 million 749 million into the stabilization fund. And we are able to afford on an ongoing basis to 700 million taxes. And again, the short term capital gains tax2240 doesn't hit the budget. So the net is below 600 million um because it's short term capital gains, it comes right out of what would flow to um stabilisation fund. So it doesn't hit the budget. So it's essentially budget neutral, zero to the budget. Um so we've done a lot of analysis and several of these, especially the estate tax kicks in um not this year, but next year and the year after just by the nature of of the state taxes. So really the impact on 23s in the 50s, not 231 million. So it's eminently affordable and In in fiscal 23. But the2271 point is, all of these initiatives are permanent and all of them are very affordable. We think 23
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BAKER - I think what we're telling on that um kind of a sideboard and something that both chairman and the secretary said, I think in New Jersey, they exempt primary residences from their state tax. So um whatever their state taxes and I don't know what the number is if you literally your biggest asset which for most middle income people their2302 biggest asset, the one that work the hardest to build equity and as their home. Um there are a bunch of states in which they just take that asset off the top and don't count it as2311 part of what they think of as the inheritance and um and I think, I think that's pretty interesting policy to

HINDS - Um Thanks for that. The dependent care tax credit. A few questions about the design. When we've done something along these lines in the Senate, we apply to make an income based. And so in your letter when you filed, you said that it would provide significant relief for taxpayers doubling the dependent care credit Um from 2 to 4 80, which is 240 difference, which is about $20 a month, doesn't really2352 strike me as significant or relief. And yet in this moment it feels like this is not the time for incrementalism. This is the time when we really want to lift up the hood and say, what do we need to do differently in the commonwealth in the in a global crisis. Um And so I'm slightly surprised that this is where you landed on this. Um Have you considered an income based application of this and even the rental credit vs because then we're left with this cost2382 $167 million dollars annually That we could be applying towards our care system in meaningful ways for families, in the way that $20 a month may not. Um, So did you consider that either of those, the income or ways to spend this? You know, it's a lot of money when it spread so thin.

BAKER - I think part of our goal here was to, was to be what I would describe as um, it's broad, especially when it came to the issue of renters in the issue of parents. Um, the the vast majority of renters in Massachusetts, I don't think anybody would argue represent what we would call the upper end of our income for tiles. I mean there are certainly people who pay a lot of money and rent and have a lot of money, but most of the people who, I have a lot of2428 money buy stuff for all kinds of obvious reasons. Um the if2432 you guys want to do more on the rental thing, you won't get an argument from us because there is no question that rents have been, How many times have I been in front of a committee in the legislature talking about the high cost of housing and the difficulties that we've had growing our housing stock Basically everybody and anybody for the past 30 years.Um, we have made some progress on that and I'm hoping with your help around housing choice and some of the money that we put to work on the first round of ARPA.

We can start to get at some of that, but let's face it, you know, if we're not the most expensive housing market in the country were certainly one of them. Um, if you2472 guys chose to do more on the rental piece, you wouldn't, wouldn't get an argument from us, um, on the dependent care thing. I think what it came down to is for those families that have dependence that they care for, whether there, you know, grandmother or grandfather or aunt or uncle or son or daughter or disabled child or disabled adult. Um, the cost associated with that is a cost of both time and money. And um, and I think we felt that it was important not to distinguish between and among, because we had no idea where you would draw the line here. And I do believe that a lot of the folks who fall into that category, um, would consider it to be, whether it's2521 $20 or $25 for $30 a month. Um, it would matter.

HINDS - I don't want to take too much time for my colleagues, but I did want to talk about the capital gains portion. And um, so I'll acknowledge Massachusetts is an outlier here on the specific decks and, but I have to say I've spent a lot of time comparing our revenue system with other states. And it's hard to pull out one item and say that, um, you know, that's where we're better or worse because sure, we may have a higher short term capital gains, but we may have lower personal income tax and not have graduated at all. And so there you have to look at the whole system before. Um, I really think it's, it's fair to make an assessment. I'm trying to dig into really what this means. And you mentioned the, uh, 150 filers would benefit, uh, 61,000, 150,000 and 61,000 had incomes below 112 strikes me as2578 a little disingenuous when we might want to look at the, the income of those who are2584 filing and who is benefiting most from a tax break like this. And I believe we're all under the assumption that it's the wealthiest in Massachusetts who benefit from this tax break, is that right?

HEFFERNAN - So we're talking about $217 sorry. And if you just look at the billions of dollars that we take in, in capital gains, it's not a huge proportion of what we take in the capital gains. But again, if you've got folks that are investing, um, and it's not, you know, in a life insurance policy or something that is tax affected, You get, you get a 1099 every year from whoever you're investing with. And it has short and long term capital gains and you have to pay it. And again, and we'll share the analysis with you. There are 61,000 people who are just trying to save for their future that get hit with a 12% penalty every year. And you might2629 think that a lot of that money goes to the very top. Let me tell you, it's pretty freaking painful to be getting a $200 Um tax penalty from that 12% capital gains.

When you're, when you're one of those folks that are hardworking that that are benefited from some of these other policies will put forward. So that 117 million again, 02 budget. Look at the $3 or $4 billion dollars we take in and capital gains. Yes. Does, does does a chunk of that2656 money go to the top? It does, But it's really impactful at the very bottom. Again, we finished under again, the top one half of 1% pay 24% of the taxes. So any cut you have Is going to be skewed higher because 24% of the taxes are paid by the top one half of 1%, 70% of the taxes. More than 7% of the income taxes are paid by the folks in the top quintile. The top 20%. So there are always going to be skewed that way. But you're talking about 60,000 people that are trying to save for their future, they're getting hit with a double-digit tax penalty in the Commonwealth. And we just think that that's unfair and uncompetitive.

HINDS - But given it does have it, is this 117 million will largely go to our most wealthy families. The timing is what struck me as a little jarring. I mean2707 literally the last two years, what people in my district talking about is how Wall Street is going through the roof and2715 and breaking records. And yet our food bank lines are going around the block and so there's a real disconnect and who benefits in an economy right now. And this is the timing for making sure our wealthiest have a bigger tax break, more of a tax break. So I guess the question is why now?

BAKER - I think from our point of view, the commonwealth, short term capital gains tax doesn't look like it looks in any other state in America at a point in time when people have figured out where they work does not necessarily have to be very close to where they live, where the world has gotten a lot smaller in the past two years because of the ability to do2755 a lot of what we're doing in here today. With respect to virtual activity. There's enormous evidence at this point. Every moving company puts out a report about once a quarter about the number of people who are leaving high tax states to go to low tax states. And a lot of2767 the people who are leaving are young people.

2769 And it's when I say young, their young to me, Okay, there are people between the ages of 20 and 40 and why2777 are they going high2778 cost of housing, high cost of living,2780 high cost of taxes. And you know, mike talks about the2783 fact that all those young people are all those middle income earners who have their money in mutual funds and all these other sorts of roll up because they're not what some centres are like me, they're not sophisticated investors, they're not playing the market, they're investing in mutual funds um within those mutual funds. People by trade stuff and when they do buy and trade stuff, those folks get hit. I would make an argument on some level.

I get your point about the fact that the majority of the money here goes to2813 wealthy people, but those wealthy people, for the most part are exactly the people who don't invest necessarily in the same kinds of products that middle income people invest in and they will hold and they will buy and they will sell when it is strategically smart for them to do it because they can and in many cases they're playing a very different game. It would be interesting for me to see what would happen if you guys took that data and carved it up and figured out who's actually paying a higher percentage of their quote total capital gain based on our current tax policy should do that. Could you do the analysis?

HEFFERNAN - We would welcome it.

HINDS - I'll just close with this then to say that ultimately another version of competitiveness is when you maintain attacks like this that is paid by our wealthiest residents, it allows you to keep the taxes lower for our working middle class and low income folks it allows and those groups, by the way, don't save as much they spend it in our local economies and having strong local economies is a piece of the competitiveness. Um and so anyway, um, it's my sense that as we're all focused on overcoming disparate impacts and making sure we have an inclusive economic recovery. Um The folks at the highest end who2886 are spending are paying the most in capital gains taxes are uh not necessarily folks that we need to be given tax breaks at this moment, trying to make this recovery what it can be. But thank you.

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REP UYTERHOEVEN - Chair is I wanted to follow up on some of the questions I don't care before I get into guided some of the things that do go to do you know, what was income and highest meet President, which increasing threshold for the tax status, the double senior circuit breaker um as well as an increase in rental production, double childcare tax credit and double dependent tax. Um It's pretty clear to me that all five of those proposals are designed to go to loading continuity residents and I want to get focused on exactly these bills benefiting as we've seen the past.2952

Um, during the COVID. But also over the last several decades about opening from inequality has increased in Massachusetts and particularly during the COVID as, as the chair Hinds pointed out, we've seen, um banks, housing and security, rising, food insecurity rising. Um, and also, but our economy is doing so battle. Um, and so it's better friendship our residents was curious around definitely that remains point in the capital against tax. The reference to 60,000 residents, the middle-income residents as well as young people. But I have here that 80% of this tax break will go to the state's climate speak of 12% earners of Massachusetts That match up with your numbers in terms of 80% of this tax break For the top 1% of residents with income residents.

HEFFERNAN - It's, it's, it's relatively accurate. We'll get back to you with actual donald numbers. But I would respond to also by saying that on the average, The bottom three of the lower three tiers average tax bill, short term capital gains was 449 in the bottom of the next 20 138 And in the middle tier. And that gets you to just around 60 million in income, 182. So those are, those are, those are real numbers being paid by real, What can folks income And again, photographer that the balance of that is very small compared to the total capital gains we collect. We have almost happy to share.

UYTERHOEVEN - Thank you. And I am just so I understand when we talk about the short term capital for sale of stocks for less than one year.

HEFFERNAN - The sale of any assets that’s sold in Massachusetts.

BAKER - It would include houses and stuff like that.

UYTERHOEVEN - They hold the house for less than it's Campbell So this is not for people who are saving over decades. People are saving up for retirement. This would only impact these short

BAKER - Not quite. I mean if you invest in um mutual fund and that mutual fund buys and sells stuff which they do over the course of the year, You will pay capital gains taxes that 12% of Massachusetts on the earnings that are generated as a result of their traffic on your behalf of course is here.

UYTERHOEVEN - Ah, yeah, I must echo what Caroline's raised around this is 80% of 117 million Going to the top one income earners are staying, which again, seeming with this timing and with the massive income involved inequality and also, particularly around the inequality by race. Um, this is something that would not impact people largely, most of them did not impact the minimum of income. I want to be supported. I want to also shift over to the tax the estate tax. Um because my understanding is that you're dealing with two pieces here in the estate tax clip as well as you're increasing the threshold tuition will
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tax. But effectively you need to have, We need to own a one million or more dollar property, is that correct?

BAKER - You just have to have $1 million dollars in assets.

UYTERHOEVEN - He's, this will not impact Anyone who does not have over $1 million. And again ,do you have any data ?

BAKER - Oh yes.

HEFFERNAN - And again almost one in 10 of every single family home in this commonwealth is approaching a million dollars

UYTERHOEVEN - Because I understand that the two thirds of this value is also going to go into the wealthiest 40%. That's what this is. It's going to impact people between $1 million to $2 million dollars estate.

HEFFERNAN - You have folks that have assets Well in excess of $2 million. So it's3218 really helping folks that have achieved that million to $2 million 30 or 40-year career, 50 years penalizing. Thank you. I don't think it is, it applies to the folks at the3232 very high end whose assets comfortably higher end.

UYTERHOEVEN - Yes, language that.

BAKER - We can do that calculation.

UYTERHOEVEN - There was a report a few years back around how the, you know net worth of the average white households in Boston was over 200,000 and the net worth of the average median household of the average white Household and that Boston was over 200,000 in the media. Well for the black black households was sudden dollars again, this tax break was not touching social media person in, in Boston 511

HEFFERNAN - Using using that data. Yes.

UYTERHOEVEN - Yeah. I also want to have a number of things around just the relative amounts because this is about $700-million-dollar bill properly. And so um, I just want, I am a little, I'm surprised around. And again I applaud the particularly doubling the child care expense tax credit, particularly my district cost of child care is exorbitantly expensive along with the cost of housing. And so this is greatly needed change anything in fact from the cost of education beyond childcare. It's really quite challenging for fans to get by. Oh good. I have here that the doubling the child care tax credit Across the state $24 million dollars While the estate tax costs 10 times nearly 10 times out of $230 plus million. And in the short term tactical gains is $117 million dollars to all those numbers. But I think

HEFFERNAN - So the numbers on those dependent related credits are actually $267 million dollars.

UYTERHOEVEN - In the child care tax.

HEFFERNAN - Both the the two related credits. You can either take it the childcare or the dependent credit. 11 you actually have to file receipts the other you take as a and their and their credits and working with you all. We change those from reductions to credits in FY20. Um and then you3367 were, as with the estate tax would be about 231 million annualized 56 million would be the number for FY23 FY24.

BAKER - So, short term capital gains tax wouldn't cost anything because it's a very small number on a very big base that is already operating at over the level that whatever, what it might mean is less goes into the state fund, but it wouldn't have effect on the operating.

UYTERHOEVEN - Um and then I'm also seeing just to come here and there is this, you know, I appreciate the, you know, endorsing particularly people who are renting right again, housing and security um well impacts anyone who is living in a household but largely doesn't have renters. And um after the increase in this rental deduction, which again, I think it creates policy, this will cost around 77 million. So hearing that must be testing task. Yes, I know the first years is a little lower, but it will be 231 million etc.

BAKER - But no one knows what the impact of changing that estate tax will be over time. I personally believe it will net itself out eventually because we are losing many people, I mean the older I get, the more of them I know3446 personally who are making decisions based on our state tax become permanent residents3451 of other states and we don't just lose their income when they move, we lose all of3461 it after they move forever until they die. And I personally, there's a reason why Julian seer who is certainly not anybody's definition of a conservative Thanks. This is a good policy. And and the fact that so many states don't have this tax at all and all of them except Oregon, I have a much higher threshold. States like New Jersey don't include property that you spend your whole life paying for to make your own. It's a pretty competitive, significant competitive issue for us. And um, and that's something that people in the Legislature on this committee generally should think about as the world's gotten a lot smaller past couple of years.

HEFFERNAN - And we have data on that. We were if you3499 look at the Data from the Census Bureau, we were one of the top five out migration states. We have the maps and the data to follow up. But so were again state tax and on capital gains. The flip side is we're trying to be more competitive and keep folks here people to create jobs, create businesses to pay more taxes. And we've seen what happens when, when the economy is going very, very strongly we bring in excess tax revenue. And what we're trying to do is give it back to the folks that are at the most, you know, at need in need. And we3529 did it in the operating budget with record numbers for EEC record numbers for food insecurity along with education, how is it? But at the same time we need to continue to attract and retain the folks that are paying taxes and you can keep them in in the state as long as possible and attract them in. There is a, you talk about those folks at the very high end but they again, they carry a big part of the burden that allows us to be able to support those continuously support those continue to support those. That is the most of the most impressive.

UYTERHOEVEN - Thank Secretary, I guess. I think what, what I'm hearing about your secretariat and Governor Baker, is this challenge with taxing well, because across state borders, ah I suppose on that logic you propose having any 0% tax on wealthy, we have to race to the bottom with other states, but.

BAKER - No, I mean we made a series of tax proposals that we believe would make Massachusetts fairer and more competitive. It sounds to me like on some of them you think we're right that we're not3600 as fair as we should be um, with respect to our competitive position. Um honestly I worried a little less about that before the pandemic. Don't worry about it more now and I worry about the fairness question Moore now to as well.

Um, but part of the reason I worry more about the competitive pieces because I've seen how many people have figured out they can live in one state, working, you know, work in another state. Um, and they have a lot of flexibility with respect to how they operate there. We're not proposing to get rid of the estate tax as 33 other states out. We're simply proposing to make it less uncompetitive than it is currently. And I would argue, honestly that attacks the taxes from the first dollar to $1 million. Someone who spent their whole life Investing in a business or in their homes whose total whose total net worth from 40 years of working Is just north of $1 million. You know, there is no state in America that taxes them on all of that. And I think we stand out what I would describe as a very negative weather and if you want to do more with the rental number, go for it.

UYTERHOEVEN - I guess I'm confused because I mean, one thing that the wealth that you have to maintain here by definition in Massachusetts is something like property, right? Like real estate property? Is that something you consider is I, I agree with you. That tax involved is a challenge. Right? Again, because capital can move across state borders and across um national borders, but particularly something like property with us having some of the highest increase in housing crisis is not something that's your problem.

BAKER - Sure.

HEFFERNAN - I think in some3713 ways we're taking3714 a swipe at it with the senior circuit breaker doubling that.

BAKER - That's for renters in for homeowners, so, right?

HEFFERNAN - Homeowners.

BAKER - just homeowners.

UYTERHOEVEN - Yeah, I'm curious because I think that's a piece of wealth, right? That we can actually if something addressing the issue that you raised.

HEFFERNAN - And again, the folks at A& F and DOR. We're happy to work with you on this. And so, you know, we are trying to do comprehensive tax package that keeps people in the state. Yeah. That brings immediate need to the folks that are, you know, unfairly treated by this economy at the moment, at the most risk and you know, and we think it's very affordable, happy to work on you, but beyond the contours as we are on any visitors.

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REP CONSALVO - Thank you Mr. Chairman and Governor, thank you for being here and Secretary, thank you for being here, thrilled to be at this meeting as a member of the Revenue Committee. And I want to thank you to both chairs for having this really important hearing. I'm also thrilled as a member of the Housing Committee to be here today and here this discussion around the rental renters income tax deduction. Um you know, I think the issue of how we can help renters is one of the critical issues facing the commonwealth, the housing issue in itself. I know both of you know this, the governor and secretary is one of the most important issues facing the state and certainly as a former Boston city councilor and a former aide and under Sheila Dillon, our chief of housing from mayor Marty Walsh.

I've seen firsthand both citywide and in my district and in my neighborhood, the issue of the impact of housing and what is happening in our communities. And I'm particularly thrilled that we're having this discussion around how we help our renters, which make up such a huge portion of my district in the city of Boston uh and the rental income tax deduction. I just want to talk about a few stats for those committee members and those who might be watching that, I think really highlights the huge importance of why we need to do something on this issue. Um first off the cap on the amount of the deduction was last updated from 2500 to 3000 and 2001, so it hasn't been touched in 21 years. And even if we were just increasing it to keep up with the increase inflation inflation, we would need to require the increasing of the cap to 4500 at a minimum.

That's based on the Bureau of Labor statistics inflation calculator. Um you know, the governor, I think you answered my only had two questions and I think you answered them, but before I ask that I want to just point out when we last did this. The median gross rent in Massachusetts in 2000 was $684 per month, which translates into an annual rent of 82 08. The $3,000 amount cap amounted to a deduction equal to 36.5% of the median annual rent at that time. We know rents have more than doubled since then Which now the deduction amounts onto 18.4 of the median annual rent. And so I think these numbers, both the inflation numbers and the numbers I've just read to you talk about why it's more important now3905 than ever to give tenants a break and to put more money into their hands.

Uh and I know my, my friend and colleague Lipper-Garabedian has a similar bill. Um she proposes raising the deduction of 4000 you proposed to 5000. My bill proposes to 6000, I did 6000 based on the fact that rents have doubled in that 20-year period. And and then I actually see that 6000 could be the floor, not the ceiling. And I heard you, I was going to ask your thoughts on one where you saw that if we were to trying to do more but also was curious where you got the 5000 number. So we have, you know, 9000 and 6000. And then my bill calls for a tax credit as well as part of providing the relief to tenants. And I'd be curious either yours or the Secretary of thoughts about adding a tax credit component to this to sort of give two times the relief to3954 10ants as well. Your thoughts on that impact fiscally. Is that something that you guys can support?

BAKER - So I'm going to let the secretary answered the question about the tax credit. But I will say that we landed on the five grand for just the reason you described representative, which is basically we were trying to come up with a number that based on, you know, one model of inflation and the growth in the cost of renting. You know, that got us to five grand if you think the number is closer to six based on the baseline you used. I mean that's or for we're open on that one. But if folks are serious about pursuing this particular initiative, you should know, we're happy to work with you on it. ON tax credit.

HEFFERNAN - And representative, we will reach out to you if you want to if you want us to model that tax credit for you. We're happy to do that.

CONSALVO4001 - Yeah, I would love to have that conversation4003 because I think that the tax credit is4005 something that's brand new and would4007 provide sort of two times the relief. Maybe not financially but the double relief if you will to renters who just who need it particularly in this day and age, what we're seeing in the price and the statistics about rents doubling. I would bet that's a number that number is even higher now, But they have more than doubled in the past 21 years. And so I think now is the time to to really act on that. I'm thrilled that has been part of today's discussion. We had it as part of the Committee on Housing discussion and I really think there's something there that we can do between all of these proposals. Rep Lipper-Garabedian this proposal. Your proposal. I think that could really provide directly relief and put money in the hands of tenants who so desperately needed.

HEFFERNAN - We'll reach out to you after this hearing. We're happy to
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SEN TIMILTY - Thank you. Chair Cusack Governor. Mr. Secretary, thank you very much for your appearance today. First of all, I'd like to applaud the initiative here, Governor and Mr. Secretary. I believe this is a surgical strike and trying to make us more competitive. I think it's very thoughtful, uh, to your point earlier, Governor, I field phone calls a fair amount from constituents who are getting older and they have to make a decision. I'm sure that's the same for many of us have to make a decision about where they're going to change the legal address to for the reasons that you've delineated today. So I think this is very important. I think it's very reasonable. And just a follow up question to that, what states of course Florida’s the the most obvious for all of us. But what states are the role models for us here in terms of being competitive with the estate tax and the capital gains, and also where are we losing a lot of our residents? To aside from Florida.

BAKER - Do you mind if we like to put that down on paper for you?

TIMILTY - Sure.

BAKER - Because there's a number of there's a number of elements will send this to the committee as well. I think it's the right question and there's a bunch of different ways you can look at it and I would rather give you something

TIMILTY - Absolutely, that would be fine. But now I think this initiative is a good one, and I think it's very thoughtful and I think you're you're using a very delicate approach with what you're doing and I think it's appropriate. So thank you. Thank
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the committee Representative, Domb

REP DOMB - Thank you. Mr. Chair and good afternoon everybody. Good afternoon, Governor and Secretary. It's good to see you. Hopefully I'll see you in person soon. Um I just wanted to reflect on something that you have described Governor baker when you were talking about the estate tax, you called you referenced a cliff effect and I have to admit um I've never heard the cliff effect described with the estate tax. My reference point for the cliff effect is usually with individuals who are receiving state benefits and for whom when they start to make over a certain amount of money, they are pushed off that benefit cliff, they lose all their benefits. And in fact, that cliff effect sabotages their ability um to have savings to create wealth. And so, I'm just wondering if when you were4214 thinking about tax cuts, which um some of which I do support in terms of for senior low income seniors. If you have thought about also using some of this revenue to protect individuals from that other cliff effect and maybe being used in a way that would help people4230 develop wealth and develop savings. Thank you. Thank you. Mr Chair.

BAKER - So one of the ways, one of the best programs we have, and it's kind of a I wouldn't call it a secret, but it doesn't get much attention. Is4242 the health connector. The health connector basically has a sliding4246 fee scale up to 300% of poverty for people who purchase their health insurance through the connector and that primarily serves a lot of folks who make too much to be on Medicaid, but either work for a small business that doesn't have the wherewithal to fund their health insurance or their sole proprietor or there's some other reason why they can't get into the health insurance market. And um and that program, in my mind has always been one of the ones that um most people don't appreciate or understand or talk about, but it has by far the best way of managing what I consider to be the kind of cliff that you're talking about.

The difference between making. Um and and by the way, because there's such significant subsidies made available by the Feds on the other side of the equation, which is the, you know, what do you pay out of pocket versus what's your premium? That program also has really significant support For people who enroll in that program up to 300% of poverty. If you guys have thoughts about how to work some of these, we'd be happy to discuss it. The challenge we usually run into on many of these is there funded in part by the Feds or they are funded entirely by the Feds and the Feds are not all that wild about creating frameworks that make it possible for4324 people to get out the cliffs. And the best example I can give you on that one is um I've talked to a lot of people over the years about this and um and then no4334 one has ever been able to get past a very small demonstration with respect to um how to create sort of an earnings path for people on SSI and that is one where um if we think we can take a run at4349 getting a broader opportunity than some small demonstration out of the Fed's, I'd be interested in pursuing it.

DOMB - Thank you. And there is a there is a bill that's been filed by rep Duffy from Holyoke which would create a pilot program around cliff effects the experience just as a sharing moment. That comes to my mind is a young woman that I met in the State House a couple of years ago during a lobby Day who worked in a homeless shelter and received4379 housing assistance from the state and she was offered a promotion at that shelter. And that promotion came with a raise in her salary but that raise in salary would have eliminated her housing benefit and forced her to live out of her car. So we would have had someone who works in the homeless shelter system facing a cliff effect that would have undermined her own housing security. Um but we'll get you that information on the pilot program and perhaps we can come together and address that issue.

BAKER - I agree. It's big, it's a big problem.

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HEFFERNAN - And just in our in our FY23 H2 proposal, we are loosening a number of the restrictions around um housing rental vouchers and moving to a more of the federal state and federal rules and allowing people to have earnings up to um you know, I can't I'm going to get this wrong but we loosened the earnings requirement from being 30 40% of your income to 30 to keep to keep more people on and over the past two budget cycles working with the legislature. We have also gotten rid of the asset tests and DTA. And tried to you know, take those first few steps and eliminating the cliff effect for those folks who you know, really get hurt by the cliff effect. I'm happy to work with you. We've made some some baby4439 steps.

DOMB - Thank you. I think it's key right? We need to help people develop savings and not penalize
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BAKER - Again, I appreciate you so quickly after we filed the bill and and we look forward to working with you. Thank you.

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REP SCANLON - HB 4361 - HB4362 - Thank you. This is my first time testifying in person in front of the committee. So it's very exciting. Good afternoon thank you to chair Cusack and chair Hinds and members of this committee for the opportunity to testify today. I come before you today to speak in support of expanding the senior circuit breaker tax credit. I too was very excited when I heard the governor's announcement during the state of the commonwealth that this is a sincere issue that we should be looking at. It is a bipartisan issue and I myself and I know many of you have, I heard from many seniors across your districts about the high cost of property right now as well as the rent in our commonwealth.

In December. I had come before this committee to speak in support of our bill related to the senior circuit breaker are bill and act relative to the senior circuit breaker credit is an important effort to update Massachusetts is scheduled circuit breaker, which is a refundable tax credit that aims to keep property taxes and utilities below 10% of annual income for low income seniors so widely used and appreciated. The maximum benefit has fallen4575 short of this in Mark of this, Mark and ultimately limited the policy's ability to reach its goal. I mentioned specifically that it is refundable, meaning that if the credit is higher than the actual tax bill, the commonwealth will issue a check to pay the difference. The scheduled circuit breaker went into effect in the tax year starting in January 2001. The statutory maximum benefit is $750. However, it is adjusted for inflation which was $1,150 in tax year 2020.

The maximum benefit, even considering inflation adjustments has not met the rising cost of housing. In the commonwealth. In fact, most claimants are using the maximum credit as the average size credits claimed is 83% of the maximum allowable according to report from mass4629 budget, which means that a large fraction of claimants are using the maximum credit and would likely need a larger credit to fully bring their property tax are red costs below the target percent. I think It is also however important to point out that low-income senior renters are eligible for the senior circuit breaker credit as well if 25% of the annual rent exceeds 10% of a senior's total Massachusetts income for the tax year and meets the income thresholds. Listening to this conversation today highlights the reality that we have a housing cross crisis in our commonwealth and we should do whatever we can to address these issues by truly impacting our most needy, most neediest residents right now.

The maximum benefit must be increased to make this policy effective As early into the program as 2005, the Massachusetts State4687 Auditor reported recommended increasing the limit on the credit to about half the average property tax bill in the state, which is what our bill would have done before, Knowing that the highest 1% income households pay less than 3% of their income property income in property taxes and the lowest income4705 households pay over 5% of their total income totals. The local property tax burden is hitting lower income households much harder. Massachusetts is overtly high property taxes are a barrier for low and moderate income homeowners over the age of 65. Additionally, as of 2020, of Americans are at risk of measured decreases in their4729 standard living standard of living, pre-retirement and post retirement. The 2020 NRRI I is down only 2% from the 2010 peak which followed the Great Recession. The NRRI on aggregate is up over 20 From the end of the 1980s.

Most Americans are at risk and the problem has continued to trend worse over time. As you know, Massachusetts is one of the most expensive states to live in own property and raise a family as well as rent property. In terms of housing, the commonwealth has the third highest average home value of any state in the nation. There are other opportunities for senior state tax exemptions through chapter 1559. But many communities have to do patchwork by filing home rule petitions to address many of these issues, which is why the senior circuit breaker is the most effective tool at addressing this issue. The senior, the center for retirement research points out in 2017 report social security provide less relative to pre-retirement earnings because of the rise in the full retirement age from 65 to 67. In addition, higher Medicare premiums and the taxation of social security benefits for more households were lower net benefits. Furthermore, the program faces a 75-year deficit and additional benefit cuts could be part of a package to restore4812 the balance.

I'm very appreciative of the gentleman from Rockland rep to coast for his support on this initiative as well as mass budgets research into it. I am appreciative of4824 the governor's similar proposal to double the cap of the credit to $2,340 and increase the cap on the rent deduction to $5,000, allowing Massachusetts to keep approximately 77 million so that they can have a dignified Allowed Massachusetts Seniors to keep approximately 77 million so that they can have a dignified retirement while still investing those funds back into the economy. The proposal would benefit over 100 million seniors. Seniors have invested in us and now it is time for4856 us to invest in them. It is time to make this vital change coming here today. I think of all of the seniors who have made our community a better place, many of whom have fought for our country to protect our democracy so that we can even have this hearing here today. I think of my own grandparents who have also struggled to make ends ends meet our seniors are the backbone of our nation and I asked for favorable consideration of the provisions related to the senior circuit breaker in this similar bill. Thank you.

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PHENEAS BAXANDALL - MASS BUDGET AND POLICY CENTER - HB 4361 - HB 4362 - Um, well thank you. Chairman. Cusack Chairman, Hinds and members of the committee. Thank you for this opportunity to submit testimony from the Massachusetts Budget and policy center. The Massachusetts economy has received a temporary infusion of more than $115 billion in federal COVID aid. Federal support for individuals, businesses, organizations and state agencies has put money in people's pockets and Boyd our economy in turn boosting our tax revenues. But this money is temporary and we caution against deep permanent cuts to state revenue based on what are likely temporary surpluses. What we find most troubling however, about the bill before us is that the majority of the revenue loss and by far the most generous tax breaks are for those of the state's wealthiest residents. This is something that has been mentioned by some earlier4990 members4990 of the committee but
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BAXANDALL - So, um, so these two, these two programs, the short term capital gains and estate tax changes would represent a massive upward redistribution of income after two years of pandemic which have seen large fortunes grow rapidly and families with the lowest incomes hit the hardest. As mentioned, the short term capital gains would cost $117 million dollars a year. Once fully in5074 effect, and that this is only5076 for profits made from selling an investment that has been held for less than a year. People can hold on longer and use a lower rate in many cases, like with property. Um according to modelling conducted by the Institute on Taxation and Economic Policy that we heard, um Uh Secretary Heffernan um affirmed as sound about right to him.

Approximately 80% of this tax break will go to Massachusetts, his highest income 1% of residents. This is something which there may be many individuals who might receive a very small break, but the vast amount of the weight of it goes to the highest residents, the bottom, Meaning sort of the whole middle class and lower income in Massachusetts would receive only 3% of the tax break. This the largest one of the largest tax5139 breaks proposed here by the governor. Zone numbers Less than 4% of all filers would receive any benefit and most of them would have at least six figure incomes. Um I want to move to the estate tax quickly here and make a few points on this. Um The tax on estates, the largest cut here being $231 million Commonwealth its benefits. Two points contrary to Secretary Heffernan's previous comments.

The Department of Revenue's analysis prepared by the Massachusetts Department of Revenue for the Senate Revenue Working Group shows that the benefits are highly skewed towards the largest estates, not the smallest taxable estates. In fact, and I put this, I'll put this in the chat. The excerpt from this, in fact, um two thirds almost of the value of the governor's proposed the state tax5203 break would go to estates valued over about two and a quarter million dollars. This may seem counterintuitive. There's two reasons why One is because the largest estates would be able to fully use the entire $2 million dollar exclusion in a state of 1.5 million isn't. And especially because unlike our income tax, the estate taxes, a graduated tax, It pays at very low rates at low end and goes up to 12%. So if you exclude $2 million, somebody with a $20 million, estate is excluding $2 million 12%,, not a single figures as someone smaller.

This is why this tax change. While it seems simple and might seem intuitive, is actually highly excuse not just to the richer or state, uh the taxable estate people,5264 but even within taxable estates, only within the highest estates, The higher estates, not only in disproportionately excuse me. Now, secondly, the real the other reason that got talked about a lot is the so called estate tax cliff. The abruptness by which the, the taxes triggered this is something which is an odd feature of the Massachusetts state tax. Um because there are taxed estates that would have had a higher after tax rate if they're lower tax pretax rate had been smaller. That is an odd feature of it. This is a feature which could be alternately fixed By just a small tax credit, which phases out quickly.

In fact, House Bill 3038 and Senate Bill 1884, which are still alive. This session would do exactly that. And according to analysis by the Department of Revenue, it would cost only a few million dollars a year, not a quarter billion dollars a year to do it this way in closing, I direct you to our written comments which provide further analysis about the far5339 far smaller tax breaks proposed in the bill for less affluent filers such as the senior circuit breaker. There's a lot really good5346 in here, although I'm concerned that the renter's deduction because it is not a refundable credit would actually be worthless to anybody who is a non filer or who5356 already receives a credit. Nonetheless, there are, there are lots of very good things in here. Um If the committee is committed to Revenue cuts, we believe that these kinds of smaller cuts or other targeted changes such as increasing or extending eligibility for the commonwealth earned5374 income tax credit make a lot more sense than these very large tax breaks that go5380 disproportionately to households that need them the least. Thank you.

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UYTERHOEVEN - Thank you Mr. Baxandall. I just had a quick question. I share your concerns around um there are some good things in this bill um, and then there are some things that5405 seem to from what you're sharing with us, particularly following the short term capital gains, reducing the um, you know, the the households that are subjected to the estate tax as well as the issue around the charitable deductions are sort of three areas. In fact the highest members that are staying. Um, and I was just wondering if you have a comparison in november, are the residents of Massachusetts will be taking5435 up vote on the fair chairman and how those three buckets impact. Definitely these people. Yeah, millionaires taps comparison on the revenues we expect if the fair share we're ass.

BAXANDALL - I'm sorry, can you clarify which, which buckets you're talking about?

UYTERHOEVEN - I was referring to the estate tax, the the short term capital gains and as well as the, I know you didn't mention this in your testimony, I saw your written one around the the charitable tax deduction.

BAXANDALL - Right, um, thank you for your, your question. Um, so the, the Uh, the fair share amendment would be uh the Department of Revenue has estimated it was around $2 billion dollars a year. There's estimates, um, That would say it would be more like $1.3 billion dollars a year. None of these estimates take into consideration the ways that large investments in transportation and education would actually grow our economy. And we've seen modeled modeled Analysis which would put it at more like $2.7 billion dollars a year, but it's a larger amounts than this. And these changes. The majority of these changes are for these regressive tax changes that you've mentioned, there's 438 million combined, for the sorry 348 million

For those two programs, the short term and the estate, which go overwhelmingly to the top 1%, the charitable, The charitable tax deduction, um, which would be reactivated by the governor's. Uh, if the governor's budget proposal was not added to as it has been in past years by the Senate, that would be $300 million dollars a year in lost revenue, of which approximately a half of it go to Filers with incomes over $1 million like um, uh, millionaire tax subsidies rolling out at the same time as, as a millionaire's tax, as it's sometimes called the relative weights of them would depend somewhat on how these different analyses flow out. I would imagine that with the various slightly progressive and even the very much smaller, truly progressive measures on the governor's bill, the overall effect with the fair share amendment would likely be progressive.

UYTERHOEVEN - Thank you. Yeah, I think the point, I was curious about how it compares with chairman and that's something that if passed would be much you for education and for transportation. My son was like through the, from hearing their numbers, it sounds like this, these tax breaks that are largely going to Benefits some of the highest eight murders in Massachusetts. The problem also reduce the impact of the by somewhere around the Florida. I know it's sort of, it's hard to say because we just don't know exactly, but it's really they're starting in terms of magnitude care that with this bill has been for us, my understanding

BAXANDALL - That that's right. It would be a kind of unfair. Uh, well I'm not, I'm not gonna try and punt with that, but yes, thank you.

UYTERHOEVEN - Could you share a little bit around the state charitable tax deduction. I know it's something that we've received testimony for max budget and policy center in the past. So I used the library on the allow exactly as I understand it also later, just how that impacts5690 the highest as a task force.

BAXANDALL - Well, um, most people and this has become increasingly so since the trump tax cuts, Most people no longer itemize their taxes. And so most people at the federal level don't get the benefit of any5711 charitable deduction, even if they do charitable giving and save the receipts and such? It's only it's overwhelmingly those with higher incomes who have accountants who follow this and for whom the charities have the The tax id numbers that they send you as reminders in the mail, so it's overwhelmingly weighted to these over $1 million Massachusetts charitable tax deduction would have a5737 feature where those who do not itemize at the federal level would be able to deduct at the state level.

It's not clear whether they, to what extent they actually will. Um And the DOR. Analysis suggests that that that effect would be overcome by the impact of fewer and fewer of lower and middle income people itemizing at all. So that's one of the reasons why it is such a regressive tax. There are ways5776 to, if we want to encourage further wider giving through the charitable deduction, A simple way to do that would be to say those folks who are not taking a charitable deduction at the federal level can, at the state level. And that would be that would indirectly be overwhelmingly targeted towards low and middle income filers as opposed to giving an additional subsidy to the highest income.

UYTERHOEVEN - The charitable, the adoption, that would be more important into the lower moderating households because it's something that, you know, it sounds great, it's sort of like he said, it's something that farming is very regressive. The problem is there any other proposals out there? People who say I want to give charitably.

BAXANDALL - Are there any bills in the Legislature now you're saying?

UYTERHOEVEN - Yeah.

BAXANDALL - If there's um, I'm forgetting the numbers of them, but there is a bill that I believe would cap it as Vermont also caps their charitable deduction to make it less regressive. There's one thing which would um, do a $300 credit as an approach. There's, there's there are there are many other ways to do this that would not be long permanent regressive. Deep revenue losses. Thank you.

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EILEEN MCANNENY - MASS5889 TAXPAYERS FOUNDATION - HB 4361 - Thanks Thanks for the opportunity to testify in support of House 4361 which is the Governor's package on tax competitiveness. Um I am submitting written comments so I'll just offer five quick points. And the first is that MTF’s support is for the package. We believe that this is a balanced approach that targets to important groups of taxpayers that are material to the state's economic recovery. The first of those disproportionately impacted by the pandemic, who are most in need of tax relief? And the second are those taxpayers with significant tax liability who have increased5935 flexibility in where they choose to locate. Um and and I would suggest that should you decide to do bits and pieces of this MTFs support is less likely.

The second is this tax package makes the income tax code even more progressive than it already is by targeting taxpayers in the lowest quintile without hurting the state's economic competitiveness. And it's certainly far more preferable than targeting high income earners through a constitutional amendment that provides no opportunity um to amend it or to clarify it, um, through statute should should have unintended consequences. The third is that as we emerge from the pandemic, we believe Massachusetts has to be much more attuned to our outlier cost, you know, just people have more choices. I think the shift in our whole work paradigm to remote work has made people um, just open to living in different places to working differently and I think it makes them much more sensitive to relative cost differences among the states.

I think we also have to think about Massachusetts demographic trends. We're in older6032 state, we have been for quite a while, um, but we're having more people who have aged beyond the workforce years, so in their retirement years, and those numbers will grow in the short term and people in retirement certainly are thinking about where they will choose to retire and cost structure absolutely matters. I think two of the provisions in the governor's bill, the short term capital gains rate and the estate tax are of particular interest to retirees, but not only to retirees, I think as Secretary Heffernan had pointed out more and more people have invested in the stock market, given the low interesting environment we've been experienced over the past decades.

So folks have turned to investments in the stock market and other investments whether it's to save for a down payment on a house and and and so they are affected by the short term capital gains rate. And and I think um reducing it would make sense and help Massachusetts certainly to retain folks both in the retiree kind of age bracket and and others. And I think that we absolutely, we6113 have to consider that. And I would say tax policy is one of the few areas that are6120 wholly within lawmakers control. So unlike the cost of housing where we can certainly adopt policies to help try to make it more affordable or reduce the cost. Um Tax rates and tax policy are set by the Legislature and there is something that we can do immediately to help in the short term with our competitiveness. On the 4th 1 is that utilizing the tax code to provide relief is often the most efficient, an effective way to provide assistance.

It enables the state to provide relief directly to the intended taxpayers without creating a new bureaucracy. It6166 also enables DOR to verify the information upon which eligibility is based to make sure that it's accurate. And so to me it's the most efficient and effective way to provide relief. And that is what6179 the governor's bill is intending to do. Um and and and the 5th point is that the unprecedented level6189 of tax collections warrant tax relief.6192 So for the first seven months of fiscal year 2022, we're seeing tax6199 Revenue collection growth rates of almost 17% on an annualized basis. And while that probably won't hold true for the entire year, the rate of tax growth is certainly above expectations and above historic norms. And I think it it certainly justifies providing some kind of tax relief, but when you consider it's not just the above expected tax revenues are stabilization.

Fund balance is healthy. It's at historic high and the state has billions of dollars in our for and other federal assistance money that has just appropriated and has yet to be spent and then millions more that it has yet to appropriate. And in the final point I'll make is the rest of the world isn't standing still. So just by way of example, we're talking about short term capital gains rates. And if you look at New Hampshire as you all know, New Hampshire has no6265 tax on income, they did have a tax on dividends and interest, which they are phasing out. So our neighbor to the north in just a few years will have no tax on any income. Um and we already know there are many people who live in New Hampshire and work in Massachusetts and I think that number will only increase should Massachusetts tax rates um be significantly different. And and and so there's more details. Certainly in my written testimony, I'm happy though to answer any questions that members of the committee may have now and thank you for the opportunity to testify.

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TIMILTY Thank you. Chair Cusack Good afternoon Mrs. McAnneny?

MCANNENY - Good afternoon.

TIMILTY - Quick question. The proposed changes relating to the estate inheritance taxes. How are they in line or not in line with what other states around the country have adopted?

MCANNENY - Sure, so, um, my understanding is there are 12 other states and the District of Columbia6335 that have an estate tax. There are a handful of other states that have an inheritance tax, but with respect to the estate tax. Um The threshold in our current law, the million dollars is tied with Oregon for the lowest threshold. So essentially Massachusetts has a more onerous tax honest states than 496360 other states. Um and and and as the governor and secretary explained, their is that cliff effect. So if you had a million and $1 your entire state is subject to the tax, whereas in most other states, it would only be that portion of your state that exceeds the threshold. So in combination the low threshold, the amount that subject and the fact that we have an estate tax at all makes Massachusetts an outlier in that regard. And and you know, I do think people have made the point that the estate tax goes mostly to the wealthy, but I can tell you um in in my home, The city of Somerville, there isn't a two family that that isn't approaching $1 million middle-income taxpayers who are caught6419 off guard.

They may not be sophisticated or savvy enough to have done a state planning where they escape it altogether. So it is um small business owners perhaps who have built up a business over their life selling it for a profit, who would be subject to it. It's residential homeowners. Um it's people have put away money for a rainy day, and I do think, given our demographics, given the number of retirees, we have given the proximity to New Hampshire and other states that Massachusetts really has to make sure we don't lose6457 many of our taxpayers that are paying6461 significant tax liability. Um you know, because it's important to understand, and some people think that it would require a person to um upheaval their life and and and move somewhere else really. Um you know, I think that people can avoid some of these taxes by rearranging their financial affairs and maintaining some presence in Massachusetts, but providing their domicile or primary residents somewhere else, and and, you know, as the governor said, he knows a lot of people personally. I can tell you, I hear about it all the time. People are making those types of choices.

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MCANNENY - Mr. Chairman, if I may make one final comment, I failed to say that MTF would like to be on record in supporting the provision. It's in the governor's budget, it's not in the bills before you, but it would, um, have Massachusetts conform to a more recent version of the internal Revenue Code right now, as you know, we're tied to the 2000 and five Internal Revenue Code, which really provides all kinds of compliance challenges for both taxpayers and DOR alike. And, and so adhering to a more recent version, um, certainly would be helpful, I think, to all involved in the administration of our tax code.

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CHARLOTTE BRUCE - CHILDREN'S HEALTHWATCH - HB 4361 - HB 4362 - My name is charlotte Bruce, and I'm a researcher and policy analyst with children's Healthwatch at Boston Medical Center, as well as the co convener of the healthy families. The6574 EITC coalition, which is a network of over 30 organizations across the state, um, and to health systems focused on improving health and economic wellbeing through expansions to the earned income tax credit. I'll first just start by saying, well, one, thank you so much for allowing us to testify before you today. Um, we asked children's Healthwatch and the coalition are appreciative for some of the provisions within the governor's proposal, specifically the ones6600 targeted uh, at low income households and that support them, namely the doubling the dependent and household dependent care credit, which we do support.

However, I do want to say that I'm here to testify today on behalf of these two groups, um, about an opportunity for to more equitably and generously target tax breaks to support low6620 wage workers and their families by including in any tax package expansion to the earned income tax credit. Specifically, I would like to advocate and testify before you today about increasing the state match of the EICC from its current 30% to 50% of the federal credit And to expand eligibility to immigrant taxpayers who file taxes and pay taxes with an individual tax identification number or an I-10 as I'll refer to it. The EITC justice. Uh, some background helps families meet basic needs, stimulates the economy and promotes work by putting more money back into families pockets. The EITC has the power to lift children and families out of poverty with a larger credit of course having a larger impact.

The EITC also is effective at reaching communities of color and previous expansions in Massachusetts and across the country have had a larger net positive impact for black and latino families who are overrepresented among low wage workers. In addition to supporting financial stability. The EITC is associated with health benefits across the lifespan, in particular, maternal and health, maternal and child health outcomes. And I go into this in a lot6689 more detail in our written testimony that I've submitted. But I will just note that the CDC. Has named the EITC one of the best public health interventions and recently categorized it as um an evidence based cost effective6705 intervention to improve health within childhood within five years. As many of you made clear in your questions to the governor and secretariat is in the interests of the commonwealth as well as common sense.

Use this tax relief package as an opportunity to invest in particular and fiscally responsible tax credits that have a proven6726 anti poverty and economic impact for our families with the lowest incomes uh and middle incomes as well. By offering more generous deduction or refund, increasing the state match to 50% will further its anti-poverty impact and provide more than 375,000, hardworking households filing income taxes across every city and town in Massachusetts with additional income to support financial stability and economic recovery. It will also help to mitigate the impact of rising inflation for households with low incomes who are most impacted by the rising costs of living that they see every day.Expanding eligibility to taxpaying immigrants who have6764 often been left out of public benefits and relief despite being on the front lines of the pandemic and hardworking uh, in our, in our6775 Commonwealth would benefit around 13,000 households.

In addition, this expansion and eligibility would create some consistency in our policies and refundable tax credits. As immigrants who file taxes with an itin are eligible for the state's household dependent member credit uh, credit that is highlighted in the governor's current proposal, but they are not eligible for the earned income tax credit, notably as I've testified before you um, earlier this year. These expansions are aligned with6806 recommendations into recent bipartisan reports from the legislature, reimagining the future of Massachusetts and a blueprint for health equity increasing the credit from 30 to 50% would cost $175 million. An expansion to ITIN. Filers would result in the cost of $9.3 million. So, relatively small costs on that front. Um, and if these two are coupled together in that I 10 expansion would be 15 million.

The last thing I just want to quickly highlight is that significant state, the EITC expansions have been made over the past few years since the pandemic as well6843 as in a number of recent state tax relief packages, for example,6848 just last month, Maryland made, uh, it's temporary pandemic increases to the state, the EITC permanent and their tax6857 relief package, which is a 45%6859 match for families and 100%. 100% match for workers without children. So, significant changes. In addition, our neighboring new England state Connecticut just increased the state the EITC match rate and even conservative state Utah passed tax relief package to implement a state, the EITC and state and six states passed legislation making ITIN filers eligible for their state by EITCs. As you consider the tax relief bill before you, I know that the EITC isn't currently included but it's it's a really great opportunity6891 to target a generous and more equitable credit to the families in Massachusetts who need it most it is also extremely cost effective and and we really urge you to consider that. Thank you so much for your time and I'm happy to take any questions. Thanks.

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HINDS - I just want to appreciate your, your highlighting EITC. I think in in previous6925 discussions of um increasing the match, it's it's always been the price tag but in the context of this package um it seems imminently reasonable and while also targeting um you know certain income levels and so I appreciate your your testimony today.

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MICHAEL FESTA - AARP OF MASSACHUSETTS - HB 4361 - HB 4362 - I want to thank you Chairman Hinds as well as Chairman. Cusack to give us at AARP an opportunity to weigh in on the Governor's bill. Um let me just start by putting it in context, you know, at AARP, we we have about 750,000 members just in Massachusetts and and about 38 million around the country and we're pretty much taking the pulse of folks who are older, 50 plus and this bill in part in particular reason why we're weighing in its because there7026 are elements of favorable thoughtful tax policy which clearly will impact in a positive way the people we serve and and the ones you serve. And so I understand and I have listened to the comments since the governor and the secretary spoke that there are some aspects of what's in the governor's bill frankly, were not weighing in on as an organization I just want to make that clear

What we are weighing in on are four elements of the bill That we think are most important to address the concerns that our members and people 50 plus generally have First and foremost is doubling the maximum senior circuit circuit breaker credit to lower the overall tax burden. This is going to impact over 100,000 homeowners who are aged 65 plus with low income. The second element of the bill that we support is increasing the rental deduction cap from 3000 to $5000 impacting approximately 880,000 Massachusetts renters And I noted with interest, Representative Consalvo is point that there are other bills out there that increased that limit As high as 6000. We are on record and want to make clear that we support an increase that's significant and we think the one that goes to 5000 is the frankly the floor of how that would address the renters challenge in this very tough economy and just generally the cost of living in the state.

The third element of the bill that we support is doubling the dependent care credit and doubling the7124 household dependent care credit which will benefit over 700,000 families in the Commonwealth. And lastly, we go on record increasing the state's income thresholds for no tax status. Uh I am submitting written testimony which fleshes out some of the details of those four elements, but I do want to just summarize and point out to you that as as many of you know, serving in the Legislature, um the impact of tax policy has significant Impact on the average lives of people and and not just those that are um you know, dealing with the state tax problems, for example, that you heard about right now, we always have to remind ourselves that six out of 10 seniors living alone are economically insecure.

That means the cost of living that they're dealing with the basic needs is less than what they have for all sources of income. So when you have targeted tax policy, which gets to the inequities and the most stressed of our constituents, that's the best public policy we think there is, and that's7192 the best tax policy that we think we can have and you know, not to repeat anything else that has already been said. I do want to say that um we recognize7203 the committee has an opportunity here to take the governor's bill and other elements of bills that are pending in the Legislature and7210 come together with the bill from this committee that will have significant impact on the people7216 that we serve and the people that we care most about. And I really hope that you as a committee, take advantage of this opportunity to come up with a comprehensive bill, which includes at least these four elements.

And the last thing I would like to say in the interests of acknowledging that family caregivers. I mean we know there's over 800,000 people in this commonwealth right now. We are taking care of loved7239 ones to keep them at home longer. We've had a tax credit bill that's been pending in the Legislature for a while now it has been extended if there's some way that that could be included in this tax package, all the better. I just want to conclude by thanking all of you for your commitment to the commonwealth, especially the seniors and those working families and lower income families. This is a great opportunity to give back to them and to strengthen their hand in what is otherwise a very challenging economic time. So thank you very much and I will submit the full testimony out of respect for the time. Thank you.

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DOMB - Hi, thank you. Good afternoon. Um I really appreciate you mentioning the tax credit for family caregivers and I'm wondering because7314 I was going to ask if there are any other bills in the queue um that would specifically support seniors. Um as we're moving forward either with everyday living expenses, um impossible inflationary, um kind of pressures on their fixed incomes or any other kind of benefits. That would be a great time to sort of identify those bills.

FESTA - Well, I7333 agree with you and that's why I mentioned it. I want you to know that the bill that Representative Rogers has filed, that's still in, you know, that's in committee and has been extended would look at first of all, let's let's agree that many of those who are the loved ones who are being cared for Are not just seniors, but they're disabled folks, but in any event, the benefit actually goes to the caregiver themselves, who are people of any age, right. A lot of the sandwich generation folks, but that bill would provide up to $1,500 in a tax credit against what would be as much as a 5 $5000 expense. Um the average caregiver, by the way, our most recent AARP study showed that the average caregiver puts out of pocket about $7200 a year in keeping a loved one home.

And I know you can appreciate is frankly every member of the committee can that much of the support we're dealing with now in7395 terms of helping caregivers in the other end of that impact is reducing the amount of folks who7402 are really driven from their home and put into much more costly, restrictive settings. And that's not what the vast majority of people want and certainly the caregivers don't want. So this comprehensive bill, which I think you clearly7416 have an opportunity to pull together. Um we see those four elements in our testimony that addresses some of those critical elements, but certainly supporting caregivers directly with that legislation incorporating the bill I think would go a long way again in acknowledging that those are the folks who are really taking it in the throat frankly economically in trying to keep loved one’s home as well as the other elements of living in the home longer.

You know, it's been testified to earlier. Um and and maybe it's almost tried to say this, but let's face it, there are a lot of people on the Cape in the Berkshires and everywhere in between who have a home that's appreciated in value, but they are on a Social Security, fixed income or they're on a limited pension. Um and it to to address tax deferral policy to raise the the credit, those things are targeting directly the folks that are really having a hard time staying at home as long as they could and should. And so we appreciate, I appreciate your question and I'm sure the committee acknowledges that anything that can be done to address that7484 aspect of the challenge would be welcomed. Certainly AARP advocates for it,

DOMB - Thank you very much. I just also want to point out that on the family caregiver7496 issue, one of the consequences of COVID that we're seeing is really um depletion in that workforce and so into the professional workforce and so there's some more reliance on family caregivers who then shouldn't have to be um becoming destitute themselves in order to provide that care. Thank you for your testimony.

FESTA - Thank you for asking and appreciate your the idea who certainly agree with it. Thank7522 you again. Mr. Chairman for giving me an opportunity to speak no other questions.

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