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After Mass. Legislature pulls plug on tax relief, a closer look at decades-old automatic refund law

United States paper currency.
Ervins Strauhmanis
Creative Commons / flickr.com/photos/76523360@N03
United States paper currency.

Massachusetts lawmakers adjourned for the year without passing much-talked-about tax relief, but the story is far from over.

The state's revenue department closed out the fiscal year last week, announcing a massive surplus. So despite lawmakers’ inability to come to agreement on how to distribute some money back to residents, a state law could trigger automatic tax refunds or credits. It'd be the first time that's happened in 35 years.

Matt Murphy from the State House News Service explains how we got here, and what the process for returning money to residents may look like over the coming months.

Matt Murphy, State House News Service: Well, this 1986 law that lawmakers just recently found out could be triggered due to the soaring nature of state tax revenues over the past year and including this year, caused them to pull the plug in the final days of their legislative session on additional tax relief that they were eyeing, including $500 million for those rebates of $250 per person for qualifying residents and changes to the state tax and tax credits for renters and parents. They were concerned and wanted to see what was going to be the final outcome of this ballot law from the 1980s.

And we got a glimpse into what that future might be last week, when the Department of Revenue, and the Baker administration, said that the surplus would be approaching $5 billion, which means even if the state had to refund $3 billion under the 1986 law, there would still be a surplus of about $1.9 billion left for lawmakers to spend to deliver tax relief, do whatever they want with, which will allow them to start thinking now about how much more additional tax relief — in addition to the automatic refund law — they can afford, and if they want to put it to that use.

We won't know until late September, the third week of September, when the final numbers will get certified, and Auditor Suzanne Bump will tell the legislature exactly how much money will be going back. But the surplus news last week does give lawmakers a head start to begin contemplating how they want to deal with this.

Carrie Healy, NEPM: You know, it's not that often that state auditors make big headlines. Suzanne Bump is not seeking reelection to the post, but at least formally has a big say in how those automatic tax relief mechanisms happen. Is there some kind of judgment that Bump gets to make here, or is all this a formality dictated by those numbers?

It does fall to her office to certify this, but the ballot law pretty much spells out what she's looking for. And her team will be looking to calculate not just the qualifying state revenues that came in, but also the wage and salary growth that is benchmarked against the revenues.

The way the law works is that state tax revenues are not supposed to eclipse the growth in salaries and wages for the given year. So she will do the calculations based on the ballot law and whatever number she comes out with is the number that must, under the law, be returned to taxpayers.

Before lawmakers finished their work for the regular session, they sent a compromise sports betting law to the governor. Charlie Baker still has time left to consider what to do with the bill, but state gambling regulators have already begun trying to put those pieces together. Matt, what is your expectation on how this will play out?

I mean, to be cliché here, I would hate to bet, but — because the governor has signaled his support for sports betting in general — there is the widespread assumption that this will get done in one form or another. As you said, the Massachusetts Gaming Commission is already preparing to implement sports betting based on the bill that was sent to the governor.

He has just a few more days now to consider this and sign it. If he does not want to sign it, he really can't veto it unless he wants to kill it. And I don't think there's anyone on Beacon Hill who thinks the governor wants to kill this bill at this point in time.

The other option is he could, if there's something he thinks he could tweak or change with the support of the Legislature, he could return an amendment and with unanimous consent in both the House and Senate that could be adopted or rejected, which would give him, once again, the option to either sign or veto it.

But I think — whether it's this week or whether it gets dragged out a little bit longer because of an amendment process — this is going to get done one way or another.

Carrie Healy hosts the local broadcast of "Morning Edition" at NEPM. She also hosts the station’s weekly government and politics segment “Beacon Hill In 5” for broadcast radio and podcast syndication.
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