COMMUNICATION TO THE HOUSE OF REPRESENTATIVES
APRIL 12, 2023
Dear Honorable Colleagues,
While there is much to appreciate in the tax reform bill now before us — from the creation of the Child and Dependent Tax Credit, to increases in the Earned Income Tax Credit, the Senior Circuit Breaker, and the Rental Deduction — I am nevertheless concerned about some elements of the bill that will overwhelming benefit the wealthy, such as a dramatic cut to the Short-term Capital Gains Tax.
Throughout my time in the legislature, the main goal for tax policy for so many of us was to pass the Fair Share Amendment. After four votes by the legislature over the course of eight years, and after two statewide campaign cycles, the people finally passed the Fair Share Amendment last fall. In the process, they told us they want the rich to pay their fair share, and they want us to make bigger public investments. However, the tax package before us now threatens to erase most of the new revenue from Fair Share.
In this context, I invite you to co-sponsor two of my priority amendments to H.3770.
Amendment #5 – Establishing a Tiered Corporate Minimum Tax
The Massachusetts corporate minimum tax has not been updated in over 30 years. Since 1989, the minimum tax for corporations, regardless of size, has been $456. This means that a billion-dollar corporation, though clever accounting techniques, can reduce its tax burden to as little as $456. We included this proposal as part of our 2020 Transportation Revenue bill, but as the pandemic struck it was never taken up by the Senate. At the time, House Leaders estimated this provision could yield between $100 and $150 million in new revenue. Including this provision in the tax reform package now before us would help make it more equitable and would better allow us to meet our future needs as a Commonwealth.
Amendment #11 — Maintaining Some Degree of Short-Term Capital Gains Equity
In Massachusetts, the highest-income 1 percent of households are expected to receive an estimated 77 percent of short-term capital gains cuts – an average of over $7,000 per year per super-wealthy households. While 86 percent of tax filers in the top 1 percent claim short-term capital gains, only 8 percent of tax filers in the bottom 80 percent do so. Moreover, analysis conducted by the U.S. Treasury shows that this tax cut would worsen racial inequality. To be clear, I recognize our current short-term capital gains rate is an outlier, and I am willing to support the part of the bill before us that drops this rate from 12% to 8% this year. That change could be seen as a fair accommodation considering the tax increase implemented by Fair Share. However, given the equity implications at stake, I do not support the part of the bill that reduces this rate from 8% to 5% in year two. Therefore, this amendment would strike that later provision and keep the short-term rate fixed at 8% going forward.
Please do not hesitate to reach out with any questions or concerns regarding these amendments.
Yours in service,
Mike
