The new governor of Massachusetts, Maura Healey, a Democrat, unveiled her budget plan this week and it includes some welcome tax relief. From the press release:
To drive Massachusetts' economic competitiveness, the package proposes reforms to two taxes in which the state is currently an outlier. It would reduce the short-term capital gains tax from 12 percent to 5 percent. Wisconsin and South Carolina are currently the only two other states that tax short-term capital gains at a higher rate than long-term capital gains, as Massachusetts currently does. This reform would have a gross revenue impact of $117 million in FY24, but would be budget-neutral due to excess capital gains not being used to support FY24 spending.
It would also eliminate the estate tax for all estates valued at up to $3 million with a credit of up to $182,000. Massachusetts is one of only 12 states that has an estate tax and shares the lowest threshold of those twelve with Oregon. This reform would reduce the tax burden on smaller estates, which historically have filed over 70 percent of estate tax returns, and helps seniors and families age in place and be able to stay in Massachusetts.
A Massachusetts "millionaires tax" was narrowly approved by Bay State voters in November 2022 after a union-backed mail-fraud campaign that deceived voters, so Healey is only proposing to give back some of what was already taken away. And it's not even clear that what she is proposing will get past the state legislature, in which Democrats and interest groups to the left of Healy are influential.
Governor Maura Healey. (Image source: Mass.gov)
Even so, it is encouraging to see a Democratic politician from Massachusetts proposing relief for estates of between $1 million and $3 million, which so many other politicians call "the rich" and target for tax increases rather than reductions. The short-term capital gains tax currently works in combination with the new millionaires tax to impose a marginal state tax rate of 16 percent (12 percent plus the new 4 percent millionaires tax) on short term capital gains; Healey's proposal would fix that problem, which is currently benefiting New Hampshire and Florida real estate brokers selling homes to Massachusetts residents looking for an escape.
Hooray for Healey for at least attempting to keep the state competitive, and here's hoping she succeeds in enacting the changes.