Top lawmakers agree to lower short term capital gains tax, reform tax cap law

Lawmakers agreed to lower the state’s short term capital gains tax by more than three percent and reform a tax cap law so that rebates are paid out equally to all residents, according to a summary of a long-awaited tax relief deal made public Tuesday.

The exact language of the bill that has been locked up in private negotiations for three months was not immediately available but Democratic leaders released a summary of the agreement “in principle” they reached last week.

Lawmakers proposed lowering the short term capital gains from 12% to 8.5%, a compromise between the House-backed 5% and the Senate’s proposal to not include a reduction at all.

If Chapter 62F, the once-obscure tax cap law that required the state to send billions back to residents last year, is triggered again, residents would receive equal payments no matter how much they paid into the system under language included in the bill. It was a House-backed provision that was not included in the Senate version.

The legislation increases the cap on rental deduction from $3,000 to $4,000, a change that legislators said will help roughly 800,000 renters across the state. Democrats also proposed excluding estates valued up to $2 million by allowing for a uniform credit of $99,600, according to the summary.

The bill increases the tax credit for a dependent child, disabled adult, or senior from $180 to $310 for the 2023 tax year and then to $440 for tax year 2024 and beyond, according to the summary. It also eliminates the child and dependent cap.

“This expanded credit, which will benefit more than 565,000 families, will be the most generous universal child and dependent tax credit in the country,” Democrats said in their bill summary.

Lawmakers also agreed to boost the statewide cap for the Housing Development Incentive Program from $10 million to $57 million once and then to $30 million annually, the summary said.

The House is scheduled to hold a formal session Wednesday, where lawmakers are expected to take up the tax deal. The Senate meets Thursday and could take up the compromise bill then.

Speaking on the radio hours before lawmakers made the tax deal public, Gov. Maura Healey said she was “very proud” of the package that Democrats put together on Beacon Hill.

“We need tax relief to make Massachusetts more affordable, more competitive, more equitable. And I’m pleased to say we are getting that, we are getting that with this package, though I don’t know all the details,” Healey said. “We have had a lot of discussions over the last several weeks and months and this will be a package that’s going to provide the right kind of relief and will make Massachusetts in my view, more affordable, more competitive, more equitable.”

This is a developing story…