BOSTON — Gov. Maura Healey signed a $1 billion tax-relief package Wednesday that calls for expanded tax credits for housing, child care, renters and seniors, cutting business taxes and overhauling the estate tax.
Healey signed the bill in the ornate Statehouse library, surrounded by legislative and business leaders and advocates who pushed for many of the changes, billed as the first tax cuts in two decades.
“Everywhere we go, we hear about how people are struggling to keep up with the rising cost of living,” the Democrat said. “This tax package delivers savings for those who need it most, while making long overdue changes that will better allow Massachusetts to compete with other states.”
A key provision of the package will overhaul the estate tax, which is charged to a decedent’s estate when the assets pass on to beneficiaries. The plan would increase the threshold triggering the so-called “death tax” to assets valued at more than $2 million.
Another provision increases the state’s tax credits for a dependent child, disabled adult and senior from $180 to $310 in the 2023 tax year, and up to $440 in tax year 2024 for low- and some middle-income people.
Legislative leaders say the tax credits would be the most generous child tax credits in the nation and will benefit more than 565,000 eligible families.
The tax relief plan will also increase the state’s rental deduction from $3,000 to $4,000, allowing more than 800,000 renters to deduct more of their annual costs from personal income taxes.
It will also double the maximum senior circuit breaker credit from $1,200 to $2,400 for about 100,000 low-income seniors with high property taxes or rent.
The state’s earned income tax credit, a popular anti-poverty program, will increase from 30% to 40% of the federal credit, at a cost of $85 million to the state.
The plan will also cut the state’s short-term capital gains tax from 12% to 5%, a key agenda item for Healey.
The House and Senate passed tax-relief proposals earlier this year, but differences between the bills had to be worked out by a six-member legislative committee that met in closed-door meetings to hammer out a final bill.
Overall, the plan will cost the state $561.3 million in the next fiscal year and $1 billion by fiscal year 2027 when it’s fully implemented, according to legislative leaders. Some portions of the tax relief will go into effect in January, while others will be phased in by 2026.
Reaction to the plan, which is more than a year in the making, has been mixed.
Liberal groups like Massachusetts Budget and Policy Center praised the child tax credits and relief for low-income seniors and families, but have criticized the business profits tax cut, claiming it benefits the state’s wealthiest residents.
Conservative groups like the Massachusetts Fiscal Alliance have panned the deal for lacking broad-based cuts to the state’s 5% income tax rate and for tacking on changes to the voter-approved 62F law by requiring tax rebates triggered by the state statute to be “equally” distributed among the state’s taxpayers.
Currently, the credit is applied to the personal income tax liability of all taxpayers proportionally, meaning bigger refunds for those who paid more in taxes.
Democrats also added a provision to the bill requiring couples who file income tax returns jointly at the federal level to do the same at the state level. The change was aimed at preventing wealthy couples from skirting the new millionaires’ tax.
Republican lawmakers sought to remove both provisions from the bill, arguing that they defy the will of the voters who approved the laws. But the Democratic majority in both chambers rejected the move.
A similar tax-relief plan passed the House and Senate last year, with broad support and backing from then-Gov. Charlie Baker, but became bogged down in negotiations and failed to pass before the end of the legislative session.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.