Stimulus and rebates on the way?
Investing Pioneer – 04/15/2023 – 9:00 PM EST
Chapter 62F, a Massachusetts law established in 1986, requires the Department of Revenue to issue a credit directly back to taxpayers if overall tax revenue “exceed[s] an annual cap tied to wage and salary growth in the commonwealth”. (Source)
The following year, 1987, the threshold was triggered, and tax rebates followed. Thirty-four years later (2021), “total state tax revenue collected was $41,813,654,358, which exceeded the allowable revenue threshold for FY22 as defined by Chapter 62F of $38,871,154,627 by a total of $2,941,499,731.”
Meaning, last year the Department of Revenue began issuing tax rebates totaling nearly $3 billion. By December 2022, most or all who had filed their 2021 tax returns received the tax refund.
For those who haven’t, a deadline of September 15, 2023, has been set. Taxpayers are on average eligible to receive a refund of 14(.0312)% of the amount of taxes they paid in 2021 (for personal income).
As for Federal Stimulus, a Kiplinger article states, “However, if you did not receive your third COVID stimulus payment of $1,400 or your 2021 child tax credit, you might be able to file your 2021 federal income tax return and get those funds.”
Given that the taxable percentage of personal income has remained fixed, but the annual cap is tied to wage and salary growth, some have called for a more equitable distribution, given that the refunds favor wealthier taxpayers. The average rebate is estimated by the Massachusetts Budget and Policy Center to be approximately $529. Meanwhile, those with higher incomes will receive rebates in the tens of thousands.
A new proposal in the Massachusetts House suggests a more equitable way of redistribution. “If passed, the House Bill would change this so that any refunds sent out under chapter 62F would be equal for all taxpayers, no matter how much they paid in income taxes”.
Even if passed, whether it will come into use any time soon may be a fair question given that the last time conditions granted a rebate via Chapter 62F, prior to 2021, was over 30 years ago.
Some individuals have expressed that instead of relatively “petty” rebates, investing the money towards outdated roads, urban schooling, and student tuition grants is a better use of the funds for the community. Others have expressed concerns that such redistribution is too close to the wealth distribution of more socialistic governments.
In terms of stimulus to stave off recession concerns, State Representative Ann-Margaret Ferrante stated, “If in Massachusetts we’re using $750 million or a billion dollars to restructure those taxes, giving it to people who have the propensity to spend, what we’re really looking at is Massachusetts going to counter where the federal government’s going, and potentially protecting ourselves and insulating ourselves from a full-blown recession.” (Source)
Indeed, if both monetary (central banks) and government powers (federal and local) issue a return of stimulus and monetary easing, the flames of inflation may be fueled. “The path to inflation is paved by deflationary scares”. Be it systemic crisis in the financial system or great reductions in purchasing power amongst large cohorts of the population.
Certainly a balancing act.