BOSTON — Massachusetts voters will decide this November whether to change how much tax revenue the state is allowed to collect before excess money is returned to taxpayers.
Question 5 on the upcoming ballot, called the State Revenue Limit and Rebate, would change the formula used to calculate the state’s annual revenue limit.
Under the proposal, that limit would be based on how much revenue Massachusetts collected the previous year, adjusted by the average growth in wages and salaries over the previous three years.
If the state collects more tax revenue than the new limit allows, the excess money would be returned to taxpayers through rebates.
Doug Howgate, president of the Massachusetts Taxpayers Foundation, said a “yes” vote would make it more likely that state tax collections exceed the limit and trigger rebates for taxpayers.
“So a yes on Question 5 would change the way the state would calculate the cap it has on how much taxes it can collect in a given year,” Howgate said. “And basically over time make it more likely that state tax collection would exceed a level where a rebate would go to tax filers.”
Supporters of Question 5 argue the change would put a tighter limit on the amount of tax revenue the state can collect and could result in more money being returned to taxpayers.
“On the proponents’ side, I think it’s a way to manage a limit on the amount of taxes the state can collect and make it more likely to have rebates going back to tax filers,” Howgate said.
Opponents, however, warn the proposed formula could create financial challenges for the state, particularly during and after economic downturns.
Howgate said the change could reduce the amount of money Massachusetts puts into its reserves, which the state can tap during recessions. Opponents also argue it could leave less money available for public services, including local aid for schools, cities and towns.
“Because of the way the question would work, it would make it really difficult for the state budget to recover from recessions,” Howgate said. “I think that’s something that might not be totally obvious for voters looking at it.”
“What we can say with some certainty is it will reduce the amount of money the state would put into its reserves, which are the reserves we tap into during recessions,” he added.
If voters approve Question 5, the changes would take effect in July 2027.
What does a “yes” or “no” vote mean?
A YES vote would change the state’s annual revenue limit, basing it on the previous year’s collections and adjusting it for average wage and salary growth over the previous three years. Revenue collected above that limit would be returned to taxpayers.
A NO vote would keep the state’s current revenue limit rules unchanged.
Election Day is Nov. 3.
This is a developing story. Check back for updates as more information becomes available.
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