Massachusetts Cuts and Complicates Taxes
Earlier this month, Massachusetts Democratic governor Maura Healey touted the tax cuts she signed into law, stating in a press release: “$1 billion in tax cuts includes savings for seniors, businesses, renters, and the most generous Child and Family Tax Credit in the country.”
Not all tax cuts of $1 billion are equal. Because I’m an economist who realizes that incentives are important, I think the best tax cuts are those that reduce a marginal tax rate or increase a threshold beyond which a tax rate applies. Both kinds of tax cuts increase the incentive to make money or save money.
By that standard, there are two particularly good components in Massachusetts’ complicated tax-cut law. First, it cuts the tax rate on short-term capital gains from a whopping 12 percent to a less-whopping but still high 8.5 percent. Second, it reduces the death tax, increasing the threshold beyond which the estate tax applies from $1 million to $2 million. Both measures will give an increased incentive to save and invest and will also marginally raise the chance that relatively wealthy people will stay in Massachusetts.
This is from David R. Henderson, “Massachusetts Cuts–and Complicates–Taxes,” TaxBytes, Institute for Policy Innovation, October 25, 2023.
I give the governor a C+ or maybe a B-. If you think that’s too generous, remember that I live in California. Here, a Democratic governor and a heavily Democratic legislature are still busy raising taxes.
Read the whole thing. You’ve already read half of it.