Senate widens tax break for low-income families
Posted: Tuesday, May 19, 2015 9:55 pm
BOSTON — Efforts to expand a popular tax credit found new life on Beacon Hill on Tuesday, even as lawmakers rejected an attempt to reduce the personal income tax rate.
A proposal by Sen. Michael Rodrigues, D-Westport, increases the reach of the state’s earned income tax credit, which allows households earning less than $52,427 to claim 15 percent of what they received on federal returns on their state taxes.
Rodrigues’ plan freezes the income tax rate at 5.15 percent to cover the estimated $145 million cost.
Gov. Charlie Baker, a Republican who took office in January, had proposed doubling the tax credit that benefits nearly 400,000 filers by scrapping a film production tax credit. But lawmakers rejected that idea.
The plan approved by the Democratic-controlled Senate on Tuesday increases the earned income tax credit by 50 percent to 22.5 percent of the federal earned income tax break over the next three years.
“We’re investing in our workers,” said Sen. Marc Pacheco, D-Taunton. “This will help the working class, the people who get up every day and fight to make a living, many whom work two jobs just to make end meet.”
The Senate’s 29 to 11 vote went largely along party lines, with Democrats — including Sens. Joan Lovely, D-Salem, Kathleen O’Connor-Ives, D-Newburyport and Barbara L’Italien, D-Andover, supporting the measure.
Meanwhile the Senate rejected a Republican proposal championed by Senate Minority Leader Bruce Tarr to roll back the personal income tax rate to 5 percent by 2017.
Tarr’s plan reduced the tax rate to a level approved by voters 15 years ago. His was one of nearly 1,000 proposed amendments to the Senate’s $38 billion spending plan for the budget year that begins July 1. The budget debate got underway in the Senate on Tuesday.
Tarr, whose proposal was backed by other Republicans, said Democrats have repeatedly failed to honor a voter referendum, which passed overwhelmingly in 2000, by declining to lower the personal income tax.
“We need to honor the will of the voters,” he said. “They’ve waited long enough.”
Two years after the vote, legislators froze the rollback at 5.3 percent and added a mechanism allowing the rate to fall only if growth in annual revenues met certain benchmarks. The income tax has since trickled to the current 5.15 percent.
Rollback supporters have blasted lawmakers for defying voters.
Dropping further to 5 percent would mean a $500 million hit to the state, according to the Department of Revenue. The most recent drop in the income tax, from 5.2 to 5.15 percent, reduces collections in the next fiscal year by $145 million.
Some suggested the Senate’s move leaves the state open to legal challenges.
“If their agenda is to tax some citizens more in order to tax other citizens less, this makes it clear that legislators are using the personal exemption to effectively graduate the income tax, which is unconstitutional,” said Barbara Anderson, president of Citizens for Limited Taxation, a Marblehead-based group that advocated the 2000 ballot initiative.
Baker has said he’s willing to consider other ways to expand the earned income tax credit, but it wasn’t clear Tuesday if he supported freezing the income tax rate as a means of doing it.
“The governor favors reducing the tax burden on all Massachusetts families and believes the best way to pay for his plan to boost support for low-income workers is by phasing out subsidies for Hollywood movie producers,” Baker spokeswoman Elizabeth Guyton said in a statement.
The measure still needs approval from the House of Representatives, which didn’t propose any expansion of the earned income credit.
Lawmakers who supported freezing the income tax rate to pay for expanding the earned income credit pointed out that changes to personal exemptions, also included in the amendment, means the average taxpayers won’t pay more.
“This isn’t a welfare supplement, these are hard-working people,” said Sen. Rodrigues said ahead of Tuesday’s vote. “Every taxpayer will pay less, even if they don’t qualify for the earned income tax credit.”
Christian Wade covers the Statehouse for CNHI’s Massachusetts newspapers. Reach him at cwade@cnhi.com.
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