The tax reform debate on Capitol Hill will have real implications for local taxpayers and municipal finance in Massachusetts – the current version that the U.S. House of Representatives will be debating next week contains provisions that would increase the tax burden on middle-class taxpayers in our state, and remove important municipal finance tools to build local economies.
Please call your Members of Congress today and ask them to protect local taxpayers by preserving the State and Local Tax (SALT) deductions, the Historic Tax Credit, and all tax-exempt bonds.
Click here for the contact information
for U.S. Representatives and Senators from Massachusetts
In coming days, both chambers of Congress are preparing to take initial votes on a wide-ranging federal tax reform bill. As currently drafted, the bill would have a negative impact on cities and towns through four major policy changes: it eliminates State and Local Tax Deductions (SALT), caps property tax deductions, eliminates deductibility of key municipal bonds, and axes the Historic Tax Credit.
Ending SALT deductions would violate a 104-year promise by the Federal Government against double taxation. This provision would have a drastic impact on taxpayers and municipal governments across the Commonwealth. Over half of Massachusetts’ taxpayers deduct state and local taxes, and all would see a painful increase in their tax burden should this bill become law. This would make it much harder for municipal and state officials to fund key services, due to the higher effective tax rate on households in Massachusetts.
Eliminating the Historic Tax Credit would harm investments in our communities. This is especially important for states such as Massachusetts, with many older buildings and factories in need of preservation and redevelopment.
Capping the property tax deduction at $10,000 would be especially painful for citizens of the Commonwealth, where there are already over two dozen communities in which the average property tax bill is higher than that limit today. Capping this deduction will make it harder for communities to fund vital services such as public schools, police and fire services, and infrastructure.
Provisions revoking the tax-exempt status of Private Activity Bonds (PABs) and eliminating Advanced Bond Refunding would damage local finances and economic development. PABs are an essential tool used to leverage private investment in much-needed local housing and economic development projects, while Advanced Bond Refunding allows taxpayers to refinance and save money on municipal bonds during economic downturns.
The MMA opposed these provisions in a press conference with Senator Edward Markey after Congressional leaders released their plan last week, because of the negative impact this bill would have on cities and towns in the Commonwealth.
Click here to read the National League of Cities’ statement opposing the elimination of SALT deductions.
Also, click here to read a letter to Congress on this issue from the NLC, signed by the MMA and 21 other state municipal associations from across the country.
It is critically important that our Congressional delegation hear from you on this issue. This bill would lead to an unprecedented double taxation of Massachusetts citizens, harm investments in local communities, and cost taxpayers more to finance municipal obligations.
A broad nonpartisan coalition is working to protect municipal concerns. Changes to tax policy should be balanced and well thought out, which is why the MMA has joined with a wide range of nonpartisan groups to protect cities and towns, including the National League of Cities, the National Governors Association, the National Conference of State Legislatures, the International City/County Management Association, the US Conference of Mayors, and the Government Finance Officers Association. US Senators Markey and Warren, and Governor Baker have all voiced opposition to eliminating key taxpayer protections, such as the State and Local Tax Deduction (SALT).
Also, the MMA would like to thank Congressman Richard Neal (1st Congressional District in Western Mass.), the Ranking member of the House Ways & Means Committee for his steadfast support of municipal concerns during the committee deliberations this week.
If you have any questions about the bill or its impacts, please do not hesitate to call or email MMA Legislative Analyst David Lakeman at 617-426-7272 at any time.