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Massachusetts Lawmakers Discuss Tax Cut, Budget Deficit

State lawmakers must develop a plan for dealing with a potential multibillion-dollar budget hole that stems from misuse of COVID-era funds for unemployment benefits. But some still believe there could be room for tax cuts.

It’s fair to wonder how far state politicians will get toward cutting taxes this year, considering how last year’s efforts turned out.

House and Senate lawmakers will meet in joint conference committee beginning this week, with the goal of ironing out the differences between their respective tax cut proposals and hoping, one imagines, that this year’s efforts aren’t as wasted as the last.

Last June talks fell apart after negotiators learned a rarely invoked law from 1986 would require the state to send nearly $3 billion back to taxpayers. This summer tax talks come just as the Commonwealth grapples with a potential multi-billion-dollar budget hole stemming from the Baker Administration’s apparent misuse of COVID-era funds for unemployment benefits.

Despite that, Doug Howgate, president of the Massachusetts Taxpayers Foundation, told the Herald Sunday that there is room for lawmakers to make tax cuts work.

“I think it will happen,” Howgate said, before explaining that the news the Commonwealth accidentally used $2.5 billion in federal COVID aid for state unemployment benefits shouldn’t have the same immediate impact that last year’s tax rebates did.

“The state is still in the process of working with the federal government. I think everyone is in the process of trying to understand just exactly where we stand,” he said. “Where we stand versus other states, what is the timeline, how common is the challenge that we face and what exactly it looks like — I anticipate that that plays out over a longer period of time.”

While that conversation continues, lawmakers have the opportunity to move forward with their plans to make the state more affordable and more competitive, he said.

The House and Senate have both approved bills to cut taxes by over $575 million, though their proposals go about the cuts in different ways. The House’s slightly larger plan came alongside their fiscal 2024 budget.The Senate’s is a standalone piece of legislation.

The House plan is more in step with one offered by Gov. Maura Healey, focused on offering tax cuts for the Bay State’s poorest residents while also offering cuts to short term capital gains and estate taxes sought by the business community.

The Senate opted against lowering the short-term capital gains tax from 12 percent to 5 percent, but agreed with an increase to the estate tax cap, though their $2 million cap is a full $1 million less than the plan offered by Healey.

Both plans have merit, according to Howgate.

“I think that, as in any one of these negotiations, the fundamental question is ‘are there good ideas on both sides and is there a way to incorporate them together’ and we think there are absolutely good ideas on both sides,” he said.

Negotiations between the House and Senate, which have each appointed three members to the committee, will begin publicly Monday. Lawmakers typically vote to hold conference committee negotiations in private during their first meeting.

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