LAWMAKERS PUSH FOR HIGHER DEDUCTIONS

Lawmakers push for higher deductions. Under the Massachusetts Senate's version of the state budget, some business owners could ultimately avoid the $10,000 cap on state and local tax deductions signed into law by President Trump in 2017. The questions now is whether key lawmakers, Gov. Charlie Baker and the rest of the Massachusetts Department of Revenue will go along with the tax relief. When President Trump came into office, it was quite clear that the limit was imposed to hurt blue states and the ability of richer individuals to have additional income to support political candidates. The blue states, most along the coastal states where property values were higher, were impacted almost entirely. Revenue to analyze the implications of allowing business owners to pass through businesses to avoid the cap, which was put into place by the Federal Tax Cuts and Jobs Act. The cap disproportionately affects taxpayers in high coast states, like Massachusetts, since they are more likely to have state and local tax bills that total more than $10,000. The proposal would affect only the business owners, not other taxpayers. Lawmakers push for higher deductions.

After the Treasury statement, state Sens. Nick Collins, Michael Moore and Bruce Tarr moved to quickly introduce a bipartisan budget amendment directing Department of Revenue to study the issue, which their colleagues approved. A group of House and Senate lawmakers are now deliberating on a final fiscal 2021 budget accord to send to Gov. Baker. Should Department of Revenue ultimately remove the cap, it could help a large number of pass through businesses like S-corporations and partnerships. In 2018, the most recent year for which data is available, more than 187,000 Massachusetts tax returns reported partnership or S-corp income. While pass through businesses include large firms--the Boston based construction giant Suffolk is one, for instance--many are small businesses like restaurants and retailers. Because it is a federal IRS tax issue, it should not affect state revenue, Collins pointed out.

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