A working group launched by state Senate leaders that's been studying the state tax code is getting together one more time before the two-year session ends, but its long-awaited recommendations may still be months away.
A spokeswoman for Sen. Adam Hinds, who chairs the working group and co-chairs the Legislature's Committee on Revenue, tells the News Service that the group's efforts will likely spill into the next session, which begins Jan. 6, since lawmakers are focused on other unfinished business this session.
Hinds, a Pittsfield Democrat, is assembling a "draft comprehensive summary" of the 21-member group's findings, the spokeswoman said, and that summary will likely be made publicly available next year, ahead of the annual budget debates that are usually held in the House in April and in the Senate in May.
The House in March approved transportation taxes and fees totaling more than $500 million. That bill has languished in the Senate, frustrating House lawmakers who say they took difficult tax votes. The bill's apparent demise raises questions about whether House and Senate Democrats can come together around new taxes and revenues, and comes as the MBTA, facing a budget crunch, moves ahead with service reductions to reflect reduced ridership.
Senate President Karen Spilka highlighted plans for the working group when she was sworn in as president at the start of this session, and later charged the panel with assessing the state's revenue system and developing a set of recommendations to update and improve it, with the primary goal of ensuring a system that "generates sufficient funds in a predictable, sustainable and fair manner while contributing to a vibrant and competitive economy and ensuring taxpayer accountability." The group began meeting in May 2019.
The COVID-19 pandemic has shifted the environment around everything, including taxes and the mobility of workers, employers and jobs. Change is facilitated by a movement towards work-from-home jobs, which could reshape everything from where workers live to whether employers hold on to big office spaces.
The $45.9 billion fiscal 2021 budget Gov. Charlie Baker signed on Friday blocks the scheduled Jan. 1 start of a charitable giving tax deduction worth about $300 million in fiscal 2022. Employers are facing massive increases next year in unemployment insurance taxes as well as a minimum wage increase on Jan. 1. And the conversation about the T has switched from ways to prevent crowding and delays to how long service cuts should last given the sharp drop in riders.
One important tax proposal is also on the cusp of reemerging on Beacon Hill. Lawmakers next session are expected to take the second necessary vote to put on the November 2022 ballot a constitutional amendment imposing a 4 percent surtax on household income above $1 million per year. A years-old estimate points to a potential for $2 billion in new annual state revenues should the measure clear Beacon Hill and be approved by voters.
In June 2019, legislators voted 147-48 to advance the income surtax (H 86), with backers clearing the 101 votes needed to move the measure along. The constitution currently mandates that a tax on income be applied evenly to all residents.
Supporters of the constitutional amendment say it addresses income inequality and that wealthier residents can afford to help the state invest more in infrastructure and public schools. Opponents and business groups have warned that its passage could drive wealthy individuals and employers out of state.
More immediately, lawmakers have budgeted this fiscal year for a year-over-year drop in tax collections and heard from experts Wednesday that tax revenues are likely to return to a growth path in fiscal 2022, depending on the success of COVID-19 vaccines that are beginning to be administered. Without natural growth in tax collections, lawmakers next session may turn to tax increases or new taxes to replace more than $3 billion in one-time revenues in the budget, prevent cuts in state services, and avoid deeper dips into state reserves that might attract negative attention from Wall Street credit rating agencies.
In January 2019, Spilka hinted at the working group's charge, saying the state must create "an economic development and tax framework for the 21st century where innovative technology-driven businesses can develop and thrive here, but where we also capture new revenue to continue providing essential services, and fund our vision for our future."
"Our economy is growing so rapidly with so many technological changes, we haven't been keeping up, we've been doing it piecemeal," Spilka said following her swearing-in. "We make laws to change in how we tax the home-sharing or the ride-sharing businesses, but we're years behind. You know the Legislature moves slowly, it takes time, so it not only decreases our tax revenue but in terms of regulation and handling all the new economy, the new technology, it creates a lot of confusion for the businesses, government officials, consumers themselves."
The working group meets 11 a.m. Thursday. A meeting agenda was not available Wednesday and a Hinds spokeswoman said the meeting is closed to the public.