The State Senate began debate on the annual budget today, and lo — it came to pass that the Senators voted (29-11) to adopt an amendment that will raise additional revenues and will do so in a progressive way!
The amendment freezes the state income tax rate at the current 5.15 percent, repealing a formula enacted in 2002 that automatically reduces the income tax rate when certain fiscal benchmarks are met. This formula has reduced the income tax from 5.3 percent to 5.15 percent since 2002. (Our friends at MassBudget have prepared this excellent analysis of the reasons that this formula compounds the problems of recent declines in state revenue.)
The amendment allocates some of the revenue resulting from the income tax freeze to increasing the state’s Earned Income Tax Credit program, which helps low-income individuals and families meet the high cost of living in Massachusetts. The amendment also increases the personal income tax exemption, which benefits all taxpayers. Pending some more number crunching, I’ll speculate that for most taxpayers, the increase in the exemption will offset the freeze in the tax rate. The taxpayers for whom the increase in the exemption is least likely to offset the freeze in the tax rate are those at the upper part of the income spectrum.
So, good on the Senate. Will the House go along when the Senate and House meet to reconcile their respective budgets? As of now, the signs are not so good. Speaker DeLeo is vexed at the Senate for even debating tax policy when, in his view, the House did not relinquish its sole power to originate what our State Constitution calls “money bills.” He’s even threatening to go to court over the whole thing. Details here.
In any event, it’s a sure thing that the Speaker won’t go along unless his members convince him to do so.