The House of Lords Speaker said Tuesday that the Senate would work to give residents some sort of tax break before the end of the legislative session.
“We are currently discussing a tax break proposal that could include changes to the income tax credit and property tax,” Senate Speaker Karen Spilka told the Greater Boston Chamber of Commerce on Tuesday. “We will continue to ensure Massachusetts is open, competitive and inclusive, and those same values guide our tax break proposal.”
In January, Gov. Charlie Baker introduced a tax break proposal to lawmakers that would save taxpayers nearly $700 million.
This included a provision to increase the estate tax limit from $1 million to $2 million and tax only that dollar amount.
Currently, Massachusetts is one of 12 states that tax an estate after a person’s death.
Of the states that do, Massachusetts has the shortest tie to Oregon, where an inheritance tax applies.
Massachusetts also applies what is known as a “cliff effect,” where assets worth just $1 below the $1 million threshold are exempt from the tax burden while that dollar translates into a significant tax liability.
It may not seem like this is a problem for many people, but it is not for the Massachusetts real estate owner. The property tax includes the value of your home.
Eileen McEnany, chair of the nonpartisan Massachusetts Taxpayers Foundation, told the Herald that the state should take the step at an age when people can more easily choose to invest their retirement savings elsewhere.
“We certainly welcome property tax changes that make Massachusetts less of an outlier. I think people like our $1 million limit and those who go over that limit are problematic,” she said. “They make people who would otherwise choose to retire here choose to retire somewhere else. Any changes that make the state more competitive would be welcome.”
In addition to raising the estate tax limit, Baker’s proposal would also eliminate what is known as the “rock effect,” with property exclusions starting at $2 million.
Even that proposal, if the legislature’s plan is correct, would mean that Massachusetts would have the third-highest inheritance tax after Rhode Island and Oregon. The administration said Baker’s estate tax proposal had a cost of $231 million in lost tax revenue.