BOSTON — Massachusetts taxpayers will be receiving an unexpected rebate from the state government this year amid a record level of tax collections.
A 1986 voter-approved law requires the state to return money to taxpayers when state tax revenues grow more than wages and salaries.
On Friday, Gov. Charlie Baker said based on the state’s robust tax collections — which have increased by about 20% over the past year — he expects the law to be triggered for the first time in decades, with estimates upward of $2.94 billion in potential rebates to taxpayers.
“With families facing continued pressure from high prices and inflation, these returns will provide some needed relief,” Baker said in a statement.
The move followed a tax revenue report issued Thursday by State Auditor Suzanne Bump’s office, which certified the excess amount of tax revenue.
Eligible taxpayers will receive a credit in the form of a refund that is approximately 13% of their 2021 tax year personal income tax liability, according to the Baker administration.
To be eligible, people must have filed a 2021 state tax return on or before Oct. 17, 2022. The credit may be reduced because of refund intercepts for unpaid taxes and other debts.
The refunds will be automatically sent as a check through the mail or through direct deposit beginning in November, the Baker administration said.
Beacon Hill’s leaders were under intense pressure to follow through with the requirements of the tax rebate law, which was approved by 54% of voters in the 1986 election.
Business leaders and taxpayer groups were threatening to take the state to court if leaders reneged on the commitment to issue the rebates.
The tax cap has only been triggered once, in fiscal 1987, when the state’s actual revenues exceeded “allowable” revenues by nearly $30 million, according to an auditor’s report. Taxpayers had to request the tax rebates and only $16.8 million in tax credits were issued, leaving about $12.4 million unclaimed.
It’s not clear what will happen with a separate tax relief plan that is stalled in the Legislature, with lawmakers recessed to run for reelection.
Lawmakers failed to pass a $4 billion economic development plan before July 31, the end of the formal sessions, which included tax rebates of $250 per individual and a buffet of permanent tax cuts, such as increasing the rental deduction cap, expanding senior circuit breaker tax credits, and overhauling the estate tax.
Legislative leaders said they were waiting to see the impact of the refunds triggered by the 1986 law before they made any decisions about whether to reconvene to take up the tax relief package.
Baker gave legislative leaders a nudge Friday, suggesting that there is more than enough surplus revenue to provide more relief for taxpayers and approve the economic development package.
“Even with nearly $3 billion going back to taxpayers, significant state and federal resources remain, and we look forward to working with the Legislature to invest this funding into our economy, communities and families,” Baker said.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at email@example.com.