The new federal tax law will reduce the taxes paid by the Bay State’s top 1 percent of income earners by more than $2.96 billion in 2019, according to the Massachusetts Budget and Policy Center, which is also cautioning of a “gradual erosion” in value of the Earned Income Tax Credit and predicting a one-time temporary spike in capital gains tax revenue.
MassBudget was one of 17 groups with representatives slated to testify at a Revenue Committee hearing Tuesday. Committee co-chairs Rep. Jay Kaufman and Sen. Michael Brady called the hearing to gather information on how the new tax law will affect Massachusetts government, residents and municipalities and learn about ways the state might respond.
The left-leaning MassBudget was using its testimony to plug a constitutional amendment leveling a 4 percent income surtax on households with income of $1 million or more per year.
“If the people of Massachusetts determine that $2.96 billion could be better spent on investments in education and transportation, which could make our economy more productive and expand opportunity for our young people, the state could adjust our tax code in ways that would effectively redirect a portion of that $2.96 billion to those higher priority areas,” MassBudget’s Phineas Baxandall wrote in an analysis of the tax changes. “That could be done by raising state income taxes for our highest-income taxpayers, who will be receiving large federal income tax cuts and benefitting from large federal corporate tax cuts.”
The average cut for the highest-income 1 percent of Massachusetts tax filers will be $84,720 in 2019, while the middle 20 percent of filers will see an average cut of $1,090 and the bottom 20 percent will receive a cut of $90, MassBudget said.