July 25, 2024


Interior Of The Road

Estate tax, earned income tax credit under review in Senate, Spilka says

The state Senate will work to provide some form of tax relief to residents before the end of the legislative session, the upper chamber’s president said Tuesday.

“We are currently in discussions about a tax relief proposal, which may include changes to the Earned Income Tax Credit and the estate tax, among others,” Senate President Karen Spilka told the Greater Boston Chamber of Commerce on Tuesday. “We will continue to ensure that Massachusetts is open, competitive, and inclusive, and that these same values guide our tax relief proposal.”

In January, Gov. Charlie Baker sent the Legislature a tax relief proposal that would amount to about $700 million in savings for taxpayers.

It included a provision to raise the estate tax threshold from $1 million to $2 million and only tax dollars over that amount.

Currently, Massachusetts is one of 12 states that taxes an estate after a person’s death.

Among the states that do so, Massachusetts is tied with Oregon for the lowest threshold at which an estate tax kicks in.

Massachusetts also employs a so-called “cliff effect,” whereby an estate worth just $1 less than the $1 million threshold is free of a tax burden, while that dollar results in substantial tax liability.

This may not seem like it would be a problem for too many people, but that’s not the case for anyone who owns real estate in Massachusetts. When it comes to the estate tax, the value of your home is included.

Eileen McAnneny, chair of the nonpartisan Massachusetts Taxpayers Foundation, told the Herald this is a move the state should take in an age when people can easily decide to take their retirement savings elsewhere.

“We certainly welcome changes to the estate tax that make Massachusetts less of an outlier. I think our threshold of $1 million and the kind of people who exceed that threshold are problematic,” she said. “They make people who might otherwise choose to retire here choose to retire elsewhere. Any changes that would make the state more competitive would be very welcome.”

In addition to raising the estate tax threshold, Baker’s proposal would also eliminate the so-called “cliff effect,” with an estate exclusion starting at $2 million.

Even that proposal, if the Legislature’s plan matches, would mean Massachusetts would have the third-highest estate tax, behind Rhode Island and Oregon. Baker’s estate tax proposal carries a price tag of $231 million in lost tax revenue, the administration said.