Legislature Approves Changes to Tax Rebate Law
The House of Representatives and Senate have voted to exclude the new revenues from the “millionaire’s tax” from the law that requires the state to rebate tax revenues when they exceed a certain benchmark. The law, known as Chapter 62F, was triggered last year, which resulted in a rebate of $3 billion back to taxpayers. Democratic lawmakers rejected attempts by the Republican leadership to include the new monies in the 62F revenue benchmark. They argued that doing so would have thwarted the will of the voters who voted to earmark all the revenue for transportation and education programs. The Legislature has also voted to rewrite the formula used to rebate any excess revenue to taxpayers. The current law returns the revenues on a pro-rated basis based on the payments made by each taxpayer. The new proposal would return the revenue in equal shares to all taxpayers regardless of their original tax liability. These changes will need to be approved by the Governor once the budget and tax bills reach her desk.
The Massachusetts High Technology Council claims the treatment of different streams of revenue in an inequitable manner would violate the state constitution by taxing income at different rates for different taxpayers. They have threatened to take legal action against the change, which they claim violates the constitution’s requirement for a flat income tax rate.
Economists Forecast Slow Growth Rate for Massachusetts
Massachusetts experienced little economic growth in the first quarter of 2023, down significantly from its late 2022 growth rate, and analysts are predicting GDP declines in the second and third quarters. Gross domestic product in Massachusetts rose at a 0.1 percent annualized rate in the first quarter, after rising at a 2.9 percent annualized rate in the final quarter of 2022, according to MassBenchmarks, which is published by the University of Massachusetts at Amherst in cooperation with the Federal Reserve Bank of Boston.
Analysts said most of the state’s leading indicators are negative, and their index projects state GDP declines of 0.1 percent in the second quarter and 0.6 percent in the third quarter. U.S. gross domestic product increased at a 1.1 percent rate in the first quarter, according to the U.S. Bureau of Economic Analysis, slowing from a 2.6 percent rate in the fourth quarter. The national outlook suggests “a possible mild recession beginning later this year,” according to MassBenchmarks.
Pioneer Institute Reports Net Migration of Mass Residents
The Boston-based Pioneer Institute recently released a study that documents the net-out migration of Massachusetts residents to less costly and more tax-friendly states. Massachusetts currently ranks fourth among all states for net out-migration of wealth, behind only California, New York, and Illinois. More than 66 percent of the income loss went to Florida and New Hampshire, two states with no income or estate taxes. From 2020 to 2021, the number of income tax filers leaving for New Hampshire rose by more than 10 percent and the number moving to Florida jumped 40 percent. The report cited Massachusetts’ inattention to tax and competitiveness policies leading to the growth in departures. The authors also identified the availability of remote work and the federal tax policy that limits state and local tax deductions to $10,000. They noted that the change in the federal tax deduction policy put a focus on those states with non-competitive tax policies and highlighted the benefits of changing domiciles to more tax-friendly states.
Massachusetts Leads Nation in Unemployment Insurance Fraud
The Department of Unemployment Assistance (DUA) is warning employers in Massachusetts to be on the alert for UI fraud as the number of fraudulent claims has risen significantly. The level of illegal claims was so significant that the claims from Massachusetts last month accounted for 45 percent of all claims filed nationwide. Massachusetts claims typically account for less than 3 percent of all national unemployment claims. The fraudulent claims include eligibility fraud when a claimant provides false information about their prior work history in order to receive benefits for which they are not qualified.
The current increase in fraud is based primarily on identity fraud through the use of stolen personal identifying information. During the most recent cycle, the DUA approved only 12 percent of all applications, rejected 25 percent, and withheld approval of the remaining 63 percent pending additional identification verification. The payment of fraudulent claims works to reduce the value of the Unemployment Trust Fund and increases the taxes on businesses that are required to keep the fund solvent.
Yard Tour Update
On May 5th Tony Shepley and his team at Shepley Wood Products in Hyannis hosted a yard tour for State Senator Julian Cyr (D-Truro), Representative Steven Xiarhos (R-Barnstable), and newly elected Representative Christopher Flanagan (D-Dennis). Prior to his election to the House, Rep. Flanagan served as the Executive Officer of the Home Builders and Remodelers Association of Cape Cod. The legislators discussed their work on promoting the development of more market-rate and affordable housing on Cape Cod and throughout the state. The availability of affordable housing is a critical concern for businesses located on the Cape that see many of their employees commute to work from off Cape.
Koopman Lumber recently hosted Senator Ryan Fattman (R-Sutton) at their Uxbridge location for a roundtable discussion centered around housing and economic development. The senator invited members of the development and construction communities along with representatives from National Grid, Eversource, and local officials. The meeting also enabled Koopman to invite their customers to join in the discussion with Senator Fattman and the utility officials, which provides them with a line of communication with policymakers and service provides that serve the homebuilding industry.