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A major business group opposes ballot questions calling for rent control and income tax relief, and is recommending alternative competitiveness proposals focused on phasing out the estate tax, overhauling unemployment insurance, boosting housing and child care affordability, and limiting state spending growth.
“These questions are intended to address critical issues that require action: affordability, competitiveness and fiscal sustainability,” the Massachusetts Taxpayers Foundation said in announcing its positions Monday. “However, the impacts of these proposals would be counterproductive; putting the fiscal and economic health of the Commonwealth and its residents in a worse position.”
The foundation is a major provider of policy research in Massachusetts and its board of trustees is littered with executives from leading businesses in the state, as well as universities and some Beacon Hill lobbying groups.
The ballot questions opposed by MTF would cap rent increases at 5 percent or the Consumer Price Index, whichever is less; reduce the income tax rate from 5 percent to 4 percent over three years; and limit annual state tax collections in an effort to force more frequent taxpayer refunds.
Supporters of the questions say the policies will deliver overdue relief from soaring rents and enable workers to better cope with escalating affordability and cost of living challenges.
According to the foundation’s analysis, the income tax rate reduction would lead to about $400 per year in savings for lower wage families, $1,000 in savings for a family with the median household income of about $104,000 per year, and $11,000 in savings for a family at the income surtax threshold of $1.1 million.
The proposal would reduce state income tax revenues by $5.4 billion when fully implemented over three years, MTF said, and the state’s ranking for top marginal tax rate would shift from 44th in the nation to 43rd.
The group said a “booming economy would do much to mute revenue losses related the proposed tax cut,” while “a recession coming at the same time as a major tax reduction would exacerbate impacts.”
Should the tax cut pass, the foundation said state budget-balancing efforts would mirror responses to prior periods of revenue losses: use of state cash reserves, state spending cuts, and increased taxes and fees.
MTF labeled the tax rate cut “disruptive” and a “bad idea” in its new report.
“Managing the impacts of a tax cut of this scale would be challenging at any time, but implementing these reductions just as major federal cuts to health care and other domestic programs are set to begin makes the fiscal impacts of this proposal doubly problematic,” the report said. “At the same time, the global economic climate is more turbulent than at any point since the Great Recession.”
Lawmakers facing possibly a dozen ballot questions this fall have balked at many of them, and MTF echoed their concerns by saying initiative petitions lay out solutions policy problems that are “often oversimplified and introduce unintended consequences that harm the state’s economic and fiscal future.”
The foundation said its alternative four-part policy agenda, which comes as lawmakers weigh possible deals to avert ballot questions, would provide “real cost relief to residents and businesses, improve the state’s competitive standing, and bring the state budget in long-term balance.”
MTF said Massachusetts is one of 12 states with an estate tax and applies it more broadly than all but two others. Phasing out the tax would reduce incentives for high-wealth individuals and small business owners to leave the state, MTF said.
To address housing and child care, MTF recommends creating housing “momentum zones,” incentivizing local zoning reform, increasing the child tax credit and boosting state support for a child care grant program.
The business group also said reducing state spending growth is “essential for a sustainable fiscal future,” citing spending trends that have “been at elevated levels for the last six years.” It recommends incorporating a state spending growth limit into the annual revenue forecasting process and providing tools to manage MassHealth.
The Senate Ways and Means Committee plans to release its version of the fiscal 2027 state budget Tuesday. No details were available from the committee Monday about when it will be released or whether the committee would meet in person to vote on the bill or vote via an electronic poll.
