Online rentals taxed under new Senate bill
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The Senate will debate the bill before the session closes this month.
Building on the expansion of a low-income family tax credit passed in 2015, Senate leaders are proposing another increase in the earned income tax credit as part of a broader economic development package slotted for debate on Thursday.
The economic development bill released by the Senate Ways and Means Committee on Tuesday calls for a 5 percentage-point increase in the EITC that would expand the credit from 23 percent to 28 percent of the federal credit, benefiting an estimated 415,000 families by about $300 in taxes per year.
Gov. Charlie Baker first proposed doubling the EITC to 30 percent last year, and the Legislature compromised on a 50 percent increase. While Baker and Senate President Stanley Rosenberg both said at the time they wanted to make another push to get to 30 percent, it's unclear how the governor or the House might receive the Senate proposal given the climate of declining revenue projections and limited time in the session to consider the impact of an EITC expansion.
The Senate bill, which is a redraft of the $915 million borrowing plan approved by the House last week to facilitate economic development, proposes to pay for the new tax credit expansion by charging hotel and motel taxes on “transient accommodations” such as apartments rented out through online services like AirBnb.
The bill also proposes to restrict the earned income tax credit to families that have lived in Massachusetts for the entire tax year, closing a “loophole” that some lawmakers have suggested in the past could save more than $7.5 million a year. The full cost of the 5 percentage-point increase in the EITC is estimated to cost the state $50 million in reduced tax collections, according to a Senate official.
“We are helping to lift hundreds of thousands of working families out of poverty,” Rosenberg said in a statement. “The Earned Income Tax Credit is one of the most powerful tools we have to grow the economy.”
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