Front-running gubernatorial candidate Maura Healey, leaning into voter concern about inflation and the economy, on Thursday unveiled a $400 million plan to expand state tax credits for children and other dependents, which she said would put more money into the pockets of families.
“This is going to give real money back to families around Massachusetts and families who are struggling,” the attorney general and South End Democrat told the Globe in an interview. “Prices have continued to increase, whether its gas, groceries, household goods. People are really struggling right now with rising costs. It’s all the more important to understand that I’m committed to addressing that.”
Tax credits lower how much certain residents have to pay in personal income taxes. Under her proposal, Massachusetts families could see annual relief of $600 per child or dependent with disabilities, with no limits to how many children or dependents they can claim.
Her plan would combine two existing tax credits into one and more than double the award.
It would also be indexed to inflation and be written directly into the tax code, so it would accurately reflect the economy and automatically benefit the recipients, instead of being funded by the legislature on a yearly basis like other tax relief programs.
“It takes a system that was too complicated and didn’t go far enough and turns it into a system that is going to work for more people,” Healey said.
As the law currently stands, Massachusetts tax filers have to choose between a $180 credit if the family can’t provide receipts of professional child care or $240 per child if they do.
The current system caps families at filing for two dependents a year.
Polls of Massachusetts residents have found that the the economy, inflation, and jobs are top-of-mind at a time when the cost of goods is increasing at clip unseen in several decades. While GOP candidates for governor Geoff Diehl and Chris Doughty have pushed for a suspension of the gas tax, there has been little talk of alternative types of relief among gubernatorial candidates.
In his wide-ranging tax cut legislation, Governor Charlie Baker, who is not running for re-election, made a proposal to double the amount of child and dependent care credit, but maintained the cap on dependents and kept the credits separate. His plan would cost about $165 million in the first year.
Healey’s plan, which she urges the Legislature to consider as they hash out the final details of their fiscal year 2023 budget, would cost an estimated $429 million, her campaign says.
“It’s clear that we need to deliver immediate relief for families right now,” Healey said. “The best way to help families and people in Massachusetts who are dealing with high costs is to make meaningful investments and put money back in people’s pockets. We have to do both.”
Evan Horowitz, the executive director at Tufts University’s Center for State Policy Analysis, said a consolidated tax credit like the one Healey is proposing simplifies the process and would have a significant impact on lower-income families. He said that the average family size in Massachusetts is relatively small, so lifting the cap on dependents would come at a relatively low cost to the state.
His organization recently published a list of recommendations for state legislatures to maximize the impacts of tax cuts and other similar policy proposals, with child and dependent tax credits near the top of the list.
The group noted that when the federal government offered money to families with young children, child poverty was reduced in a significant way.
“I think it is generally considered a pretty progressive policy, especially in the sense that it’s targeted at lower income families. But it’s also the kind of approach that attracts interest across the political aisle, it’s a family-focused policy,” Horowitz said. “It’s actually meant as a credit for kids. We all start as kids and we all need to be nurtured as kids. The universal impulse is, ‘let’s help everyone when it matters most.’”