The $48.5 billion budget Gov. Charlie Baker is proposing for fiscal 2023 pairs a modest increase in state spending with a total of $693 million in targeted tax relief.
Baker filed his eighth and final annual budget recommendation alongside a proposal to double the allowable maximum for the senior circuit breaker property tax credit and increase the cap on deductions for rent payments from $3,000 to $5,000. The proposal would also, according to the administration, double credits for dependent and child care and double the threshold at which the estate tax kicks in to $2 million.
The Republican governor is also looking to raise the income level at which people are required to file taxes, a move the Baker administration says would affect about 234,000 low-income taxpayers and cost the state $41 million annually.
Currently, Massachusetts residents must file an income tax return if they earn $8,000 as a single filer, $14,400 as a head of household, or $16,400 as joint filers, according to Baker’s budget office.
Baker’s plan would raise the no-tax threshold to align with the federal level, bringing it to $12,400 for single filers, $18,650 for heads of households, and $24,800 for joint filers.
Baker teased the tax breaks in his Tuesday night State of the Commonwealth address, calling for the state to “invest in Massachusetts families” and “give them back some of the tax revenue they created through their hard work.” House and Senate Democrats will put forward their own budget plans for next year this spring, and legislative leaders on Tuesday said they wanted to know more about Baker’s tax relief ideas before weighing in on them.
Berkshires pols interested in details
There is at least some appetite among Berkshire County lawmakers to consider the changes, and they said the details of the proposals must be scrutinized.
“If you’re talking about tax credits or whatever it might be to keep seniors in their homes longer, and recognizing that the prices of renting and homeownership are increasing, geared toward keeping people in their homes, that’s worth talking about,” state Rep. Paul Mark, D-Peru, said Wednesday afternoon, before Baker unveiled his full budget proposal at a news conference.
State Rep. Tricia Farley-Bouvier, D-Pittsfield, said that she is “supportive in the concept” of the Baker tax proposals, although “it’s very important to get into the details.”
With property tax credits for seniors, for example, Farley-Bouvier wants to ensure that any affect on municipal government revenues would not jeopardize those governments’ ability to provide services that seniors need.
“Each one of those needs to be looked at,” she said. “We have to see how much it costs, how it can be implemented, and how we can do it with fairness and equity.”
State Rep. William “Smitty” Pignatelli, D-Lenox, said that housing and child care are “critical” areas that should get some conversation about tax relief, although he cautioned against reading too far into the governor’s budget.
“I’ve learned to never get too excited about a governor’s budget or state of the state address,” he said. “I think they’re great historic events, but it’s just one person’s vision of what’s going to happen in the next 18 months.”
State Rep. John Barrett III, D-North Adams, also said the proposals deserve attention but that “the devil’s in the details.”
“They do some of these things, and they sound good,” Barrett said. “And they give relief, but what happens in difficult times when they have to look at cutting other programs, possibly?”
State Sen. Adam Hinds, D-Pittsfield, said he is “interested in considering some of the approaches outlined” alongside “other tools” in the budget process.
“For example, child tax credits have been critical for lifting children out of poverty,” he said.
Baker spending plan
Baker and Lt. Gov. Karyn Polito had also previously said they would seek a 2.7 percent, or $31.5 million, increase in unrestricted local aid in their administration’s final budget.
The fiscal 2023 proposal will feature $5.989 billion in Chapter 70 aid to local schools, a figure that budget officials said includes an increase of $485 million to fund the next installment of the multi-year school finance reform known as the Student Opportunity Act.
There are no broad-based tax increases in Baker’s budget.
Baker’s budget secretary, Mike Heffernan, and legislative budget writers earlier this month agreed on a tax-revenue forecast of $36.9 billion in fiscal 2023, up 2.7 percent from the amount they now expect to collect this year. The projected tax haul would also mark a sharp slowdown in the explosive growth of tax receipts.
The Executive Office of Administration and Finance said the $48.5 billion Baker is proposing in spending and transfers lands half a percent above fiscal 2022 levels. A drop in spending at MassHealth, tied to the expected end of the federal public health emergency in April, largely offsets growth in other areas, the budget office said. Enrollment redeterminations are prohibited during the emergency.
Baker is also recommending a $250 million supplemental transfer to the pension fund, on top of the $3.744 billion transfer called for under the consensus revenue agreement announced earlier this month between Heffernan and Ways and Means chairs Rep. Aaron Michlewitz and Sen. Michael Rodrigues. The administration is projecting the state’s stabilization fund balance will grow to $6.6 billion by the end of fiscal 2023.
Baker’s budget contains $80 million for the Residential Assistance for Families in Transition program, $57 million for the HomeBASE housing program, $123 million to address sexual assault and domestic violence and more than $43 million for addiction prevention and treatment.
State finance officials said it also includes $78 million for re-entry and diversion programs, expands the Summer Nights youth programs offered in cities across the state, increases rates for the Senior Nutrition Program, and increases funding for foster parents.
On the policy front, outside sections would increase the per-pupil facilities component of charter school reimbursements, create a new, 24/7 behavioral health help line, and expand eligibility for the Medicare Savings Program.
Baker is also refiling outside sections that have failed to gain traction with the Legislature, including proposals to allow Lottery products to be purchased with debit cards and to allow MassHealth to directly negotiate rebate agreements for drugs not subject to the Medicaid Drug Rebate Program.
Eagle staff writer Danny Jin contributed to this report.