BOSTON-Tax watchdogs are urging Beacon Hill lawmakers to provide fiscal relief under a 1986 voter-approved law and threatening to go to court if taxpayers don’t get refunds.
Republican Gov. Charlie Baker announced several weeks ago that a record level of tax collections over the past year could trigger refunds through the obscure law, which requires the state to return money to taxpayers when state tax revenues grow by more than wages and salaries.
But the tax relief plans are in limbo as Democratic legislative leaders take stock of how the 36-year-old tax rebate law would impact a separate $1 billion relief package that includes one-time $250 rebates for middle-income taxpayers, changes to the estate tax and breaks for renters, seniors and caregivers.
Amid the confusion, taxpayer advocates fired a shot across the bow Monday, announcing that if the state seeks to delay or change the 1986 law they have prepared a legal challenge to force officials to issue the required refunds.
“The taxpayers have lawyered up,” Dan Winslow, president of the New England Legal Foundation, said during a live-streamed briefing Monday. “Our hope is that the public officials involved will carry out their oath of office and follow the law as it is written … But if that doesn’t happen, we’re prepared to go forward with a lawsuit to compel compliance with the law.”
The threat of a legal challenge was also included in a letter from tax advocacy groups — including the Goldwater Institute, Beacon Hill Institute and Massachusetts Fiscal Institute — to Auditor Suzanne Bump, whose office must certify how much money would be returned taxpayers under the so-called “Chapter 62F” law.
The Baker administration said recently that 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 upwards of $2.5 billion in potential rebates to taxpayers.
The state Executive Office of Administration and Finance said current projections suggest that the tax cap would result in taxpayers getting back about 7% of the income taxes they paid in 2021.
That means an individual with $75,000 of taxable income last year would get a return of about $250, the state agency estimated. The exact amount won’t be known until Bump’s office finalizes its tax revenue report, which is expected by mid-September.
The law, which was sponsored by Citizens for Limited Taxation and other groups, was approved by 54% of voters in the 1986 election.
So far, it has only been triggered once, in fiscal year 1987, when the state’s actual revenues exceeded “allowable” revenues by nearly $30 million, according to an auditor’s report. At the time, taxpayers had to request the tax rebates and only $16.8 million in tax credits were issued, leaving about $12.4 million unclaimed.
But the statute also allows taxpayers to sue the state to refund tax credits in the event that the law is triggered and they don’t comply.
Republican candidate for state auditor Anthony Amore said he already lined up two dozen taxpayers for a potential lawsuit if lawmakers seek to delay or change the 1986 law. He has tapped former U.S. Attorney Michael Sullivan to provide legal representation in the potential lawsuit against the state.
To be sure, Baker and Senate President Karen Spilka, D-Ashland, have said they believe that the state can afford both credits under the tax-cap law and other relief, but House Speaker Ron Mariano, D-Quincy, has said he wants to know how much money is available to spend before moving ahead with the relief package.
But critics note the state Legislature has a long track record of sidelining tax relief, citing a nearly two-decade delay in reducing the state’s personal income tax rate to 5%, which was approved by voters the 2000 elections.
Beacon Hill Institute President David Tuerck said the intent of the Chapter 62F law “could not be clearer” and there should be “no hesitation” by state leaders to provide the refunds.
“With nearly unprecedented revenue growth over the last two years, we hope that the Legislature uses this law as an opportunity to impose some much-needed discipline on its spending habits, rather than play games in an attempt to sidestep the will of the people,” he said. “We hope that legal action will ultimately not be necessary.”
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@northofboston.com.