Aug 2, 2022 - Politics

Democrats put tax relief plan on hold

Illustration of the Massachusetts State House with lines radiating from it.
Illustration: Brendan Lynch/Axios

Massachusetts taxpayers faced with increasing costs on everything from gas to child care and groceries are being left in the cold after plans to return around $1 billion in taxes hit a serious complication.

Driving the news: A month after promising to provide a combination of $250 tax rebates and recurring annual tax breaks for all economic classes, Democratic leaders have had to delay the plan while they struggle to understand the impact of an obscure law that could ultimately mean even more tax money returned to residents.

  • The state's plentiful tax revenues triggered Chapter 62F, a law passed by voters in 1986 that would mean around 7% of 2021 income taxes — about $3 billion — needs to be returned.

Why it matters: Tax relief payments could now be months away, at a time when the national inflation rate is the highest it's been since 1981.

What's happening: Democratic leaders are now trying to figure out if they should stick to their original tax relief plan if they have to pay out an additional $3 billion in rebates.

The intrigue: Beacon Hill watchers have been speculating on how budget experts could have been blindsided by the law.

  • A spokesperson for Senate President Karen Spilka told Axios that the conditions that trigger a refund are so specific that it wasn't until after an analysis of June's revenue figures that budget writers were alerted they could exceed the cap.
  • Ahead of his self-imposed final lawmaking scramble last week, House Speaker Ron Mariano said he may simply ask the House to remove the tax trigger law.

What they're saying: When it became clear lawmakers couldn't work out a deal early Monday morning, Senate budget chief Sen. Michael Rodrigues (D-Westport) told reporters Democratic leaders need more time to address the surprise tax cap.

  • "We don't even know exactly what the impact is going to be," Rodrigues said.
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