Senate Tax Plan Would Benefit All Residents

To: The Salem News
From: Senator Joan B. Lovely
Date: 29 May 2015

To the editor:

Last week, the Senate debated and passed its version of the fiscal year 2016 state budget. Proposed with the title and theme of “Lifting All Families”, the Senate budget achieves its goal. On top of increased local aid funding and much-needed MBTA reform, the Senate also included provisions to expand the earned income tax credit (EITC) and cut taxes for all Massachusetts taxpayers. I would like to take this opportunity to share the reasons why I supported this plan which will help all working families in Massachusetts.

First, the Senate’s plan expands the EITC from 15% of the Federal EITC to 22.5% over the next three years. This means that Massachusetts tax filers claiming EITC would receive $2.25 for every $10 granted through the federal program. Under this structure, EITC has proven to be an effective program that benefits Massachusetts workers.

Second, the proposal also lifts the personal exemption for all taxpayers in Massachusetts. The personal exemption allows Massachusetts tax filers to exempt a certain amount of their personal income. Under the Senate plan, this exemption would increase from $4,400 to $4,800 for an individual and from $8,800 to $9,600 for a married couple filing jointly. With this provision, the plan would ensure that all residents, regardless of income level, receive a tax cut.

Third, to fund the changes to the EITC and personal exemption, the proposal keeps the income tax rate at its current level of 5.15%. In recent years, the income tax rate dropped 0.05% in January 2012, 2014, and 2015 in response to Massachusetts voters approving a ballot question in 2000 that called for a reduction in the state income tax. In analyzing the impact of these reductions, the Massachusetts Budget and Policy Center reported that 25% of the benefits have gone to the top 1% of earners making an average annual salary of $2.57 million. Even further, 67% of the benefits flowed to the top 20% of income earners. The Senate’s plan to increase the EITC and raise the personal exemption implements a change that cuts taxes in a way that helps all working households, not just the top 1% of wage earners.

Expanding the EITC has also consistently received bipartisan support. The idea has been praised by both democrats and republicans as a proven way to stimulate economic growth and help working-class families. Earlier this year, Governor Baker proposed an even greater expansion of the EITC and advocated for doubling the current benefit from 15% to 30%. The Senate’s plan to expand the EITC would provide an average benefit of $472 to approximately 415,000 tax filers in Massachusetts, including over 8,650 individuals and families in Beverly, Danvers, Peabody, Salem, and Topsfield.

Since the Senate included its proposal within its version of the budget, the plan is subject to a conference committee tasked with reconciling the differences between the House and Senate budgets. Nevertheless, it is important to make sure the constituents I represent know the reasons why I voted in favor of the Senate’s plan, which offers tax relief to all Massachusetts families.

Joan B. Lovely
State Senator, 2nd Essex District

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