MassInsider

Press Release: 2021-07-21

Baker’s Budget Vetoes:

Coming in at $47.6 billion dollars, Governor Charlie Baker finally addressed the legislature’s FY22 state budget. Due to an influx of taxpayer money, the Governor accepted the majority of the pet projects lawmakers included that are estimated to be worth $90 million. However, the Governor did exercise his veto pen in a handful of tax related sections. The largest and most well-known being a delay in the charitable giving tax deduction.

For some background, in 2000, with 72% of the voters voting in favor, Massachusetts voters passed a measure that would have allowed for a state tax deduction on charitable giving if state funds allowed it. Every Massachusetts county voted in its favor with 347 of 351 cities and towns agreeing.

That same year, voters passed a ballot question to roll back the state income tax rate to 5%. Clearly, the voters were sending a pro-taxpayer message to State House leaders.

After nearly 20 years, the state income tax was finally rolled back to 5% last year. The charitable giving tax deduction has been put off by lawmakers ever since. Renewed calls to include the charitable tax credit in this year’s budget were ignored by the Speaker and Senate President. Governor Baker has acknowledged the generosity of Massachusetts taxpayers as the state collects more taxpayer money that they ever dreamed of, and now the Governor is rightfully telling the legislature to reconsider.

The legislature would need a 2/3 majority to override Gov. Baker’s veto. If they do not override the Governor, the will of the voters will finally become law. The result would mean private sector charities could do more work to benefit communities, and taxpayers can save more of their hard-earned money.

Further, the legislature included an elimination of some tax credits more narrow in scope, including a medical device user fee credit, and a harbor maintenance tax credit. Gov. Baker also vetoed these tax credit eliminations, despite the legislature claiming that only a small number of companies used them and didn’t provide much incentive.

Gov. Baker returned a rather elaborate plan that would help pass through businesses navigate a 2017 federal tax change, and pay lower federal taxes. The legislature’s plan would skim 5% off of this benefit while Gov. Baker is pushing to let these pandemic-ridden businesses keep the total benefit.

Lastly, lawmakers are trying to make it easier for state employed double dippers to earn a high income living. A retired state government employee who earns a pension is capped at working no more than 960 hours annually for the state if that employee wants to go back on the state payroll. The legislature moved that number to 1,200 hours annually. Full time employment is considered 2,080 hours per year. Governor Baker responded by allowing up to 975 hours. Gov. Baker said in his veto message, “An increase of 240 more hours per year is a significant policy change and moves the Commonwealth and its municipalities closer to a place where employees continue to work near full-time while collecting a pension, without any corresponding changes to improve the current practice.”

MassFiscal will keep you updated on what the legislature does next.