BOSTON — A tax deduction for charitable donations approved by voters more than two decades ago will be delayed again after lawmakers failed to authorize the changes before recessing for a seven-week winter break.
Under the law, people would be allowed to claim charitable contributions against their Part B adjusted gross income on their state taxes. The deduction could not be used for donations of household goods or clothing.
Voters approved the deduction in 2000 as part of a referendum rolling back the state’s personal income tax rate to 5%. The referendum was approved by more than 70% of voters.
Two years after its approval, the Legislature froze the personal income tax at 5.3% to plug budget shortfalls and created a mechanism to reduce the tax rate as revenue growth allowed.
As part of the changes, lawmakers froze the charitable deduction until the state’s income tax rate fell to 5%.
The state had planned to allow the deductions starting this year since the income tax rate finally dropped to 5%. But lawmakers postponed it, citing the financial impact of the pandemic.
Gov. Charlie Baker added a provision to the current fiscal year’s budget that would have authorized the deductions, but lawmakers stripped the changes from the final spending package. Baker vetoed the provision delaying the tax deduction, but lawmakers overrode his objection.
Budget writers estimated that postponing the law until 2023 would free up about $64 million for the current fiscal year budget.
Baker argues the state’s financial situation has improved and he does not want to postpone it any longer.
“This deduction was approved by voters 20 years ago and slated to go into effect when state finances allow, and the combination of strong state revenues and serious needs facing nonprofits and charitable organizations necessitates this tax deduction’s going into place,” Baker wrote to lawmakers recently.
Senate Minority Leader Bruce Tarr, R-Gloucester, a chief proponent of bringing back the tax deduction, said he is “disappointed” that the Legislature didn’t take action on it before breaking for a long winter recess.
Tarr likens the delay to a move by the Legislature years ago to postpone a reduction in the personal income tax rate that was approved by voters by a referendum.
“It’s another example of something that the voters overwhelmingly mandated that has continued to be short on Beacon Hill,” he said. “I think it promotes distrust in government to have that kind of a situation and it’s hard to defend given the financial situation we find ourselves in.”
Massachusetts has benefited from an influx of billions of dollars in federal pandemic relief, as well as better-than-expected tax collections in recent years that have given Beacon Hill policymakers a pile of surplus money.
Tarr sought to implement the voter-approved tax break as part of the $4 billion plan to spend American Rescue Plan Act funds and state surplus revenue.
But the Democratic-controlled Legislature rejected his amendment, ensuring that the charitable deduction won’t be available for income tax filers next year.
Groups that work with nonprofit groups argue that the tax deduction law has been delayed long enough.
“Most nonprofits saw significant revenue losses last year and had to layoff workers and cut hours,” said Jim Klocke, CEO of the Massachusetts Nonprofit Network. “This law will promote charitable giving and help nonprofits recover from the pandemic.”
Most people who would be using the deduction live in low- and middle-income households that often donate smaller amounts to charity but have not been able to get a state income tax deduction, he said.
“This is a universal deduction available to everybody,” Klocke said. “It’s been delayed by more than 20 years, and we believe it’s time to restore it.”
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at firstname.lastname@example.org.