Massachusetts Slid 12 Places in Tax Competitiveness Annual Report
BOSTON, OCT. 25, 2023…..Continuing her tax reform victory lap, Gov. Maura Healey spoke to State Street executives Wednesday flanked by signs that read, “Saving Businesses Money.”
The governor spoke about business-friendly initiatives that she championed and were included in a tax relief bill she signed earlier this month.
“We are laser focused on being the most competitive state we can be when it comes to business and economic growth and development,” Healey said at an event at State Street Global Headquarters in Boston. “And that gets to the kind of investments we make, the kind of talent that we’re able to attract and, importantly, retain.”
Despite what the governor touted as tax victories for Massachusetts businesses, the Bay State this year fell further than any other state in the Tax Foundation’s 2024 State Business Tax Climate Index report, which was released on Tuesday.
Massachusetts slid 12 places to be ranked 46th out of the 50 states in tax competitiveness.
The report attributes this decline to the adoption by Massachusetts voters of Question 1 in November 2022, which amended the constitution to impose a 4 percent surtax on income over $1 million. It’s a proposal that Healey supported and House and Senate Democrats pushed to the ballot.
Some members of the business community have said they see the state’s new tax relief law as a way to counterbalance the narrative that Massachusetts is known for high taxes.
On Wednesday, Healey highlighted some of these measures. She talked about cutting short-term capital gains taxes “to bring us closer to alignment with other states,” and increasing the threshold for when the estate tax kicks in, which she said would “improve financial planning for families, make it easier to pass on homes and businesses,” and “help more retirees keep their wealth in Massachusetts and therefore stay in Massachusetts.”
On a House-backed initiative to create a single sales factor apportionment, which would calculate taxes based only on the portion of a corporation’s sales that occur in the state, Healey said Wednesday that State Street deserves “a lot of credit for your advocacy on this front.”
“That is important as it was a barrier that unnecessarily got in the way of some of our companies and the work that they need to do not only to hire but to grow in our state,” Healey said.
The governor also highlighted other pieces of the tax package that she said would stimulate the economy and help workers, which in turn helps businesses who are trying to recruit employees, she said, including the increased child and dependent credit and expanded earned income tax credit and low-income housing incentives.
Healey used the event to promote her new housing bond bill.
“There’s no single greater challenge for our state than housing, we need more housing and we need it now. It is the reason that people are leaving the state. It is the reason that employers would consider going elsewhere, or some might consider not coming here in the first instance” she said.
The policy-heavy $4.1 billion bond bill, which Healey filed last week, aims to spur much-needed housing production. Her office estimated the proposals in the bond bill combined with the new housing-related tax credits could lead to the creation of over 40,000 new units, chipping away at a shortage that has previously been estimated at roughly 200,000.
Healey also backed transfer taxes, accessory dwelling unit zoning reform and no-fault eviction sealing — all hot-button topics that advocates say will facilitate new affordable units and protect those vulnerable to housing insecurity.
The Legislature shipped Healey’s bill to the Joint Committee on Housing this week and while the governor is expressing urgency about the issue, it may be a while before a bill gets through the Legislature.
Rep. Aaron Michlewitz, chairman of the powerful House Ways and Means Committee, attended the State Street event with Healey on Wednesday to promote representatives’ contributions to the tax package.
Asked after the event what he thought of the governor’s housing bond bill, Michlewitz said he had “only taken a brief look at it” but “it’s certainly something that we’re interested in tackling.”
The bill would need to pass through Michlewitz’s committee before it made it to the floor for a vote.
“There are a number of initiatives and spending initiatives, I think they both have some different spins on them that I think we have to — we’re certainly going to take a look at. But it’s a little early in the process to kind of give a full vetting on it, until it gets to the hearings and conversations,” he said.
Responding to a question about any specific policies in Healey’s bill that he would support, Michlewitz said, “any initiatives that can obviously keep things affordable, make things affordable, I think is something that we would welcome. But in terms of the logistics of it, the nuts and bolts, I think we’re still working through that.”
The chairman said the House wants to take up the bill, but “it’s going to take a little time.”
“I feel confident that we’ll work through it and, you know, try to get it done before the end of the legislative session, but as quickly as possible,” he said.
