BOSTON (State House News Service) - Top House and Senate Democrats have reached an agreement on a tax relief bill, and plan to send it to Gov. Maura Healey next week as an opening act for their fall session.

The accord, announced without details in a two-sentence statement Thursday evening, could bring to end a debate that began nearly two years ago in an effort to put a dent in the state's high cost of living and make Massachusetts more competitive for residents and businesses.

In July, legislators broke for a summer recess without a deal on tax relief, instead allotting $581 million to cover tax relief impacts in fiscal year 2024. The final package's value could exceed $1 billion in the out years, or come in lower depending on which relief measures are swept into the consensus bill.

Competing House and Senate tax relief bills died in 2022 when the Legislature was blindsided as surging revenue collections required the state to give back about $3 billion in tax collections under a decades-old voter law. The huge rebates prompted Democrats to pull back their targeted tax relief plans.

In November, voters adopted a Constitutional amendment put on the ballot by Democrats that raises taxes by more than $1 billion on people and households with incomes above $1 million per year, monies that legislators quickly set about appropriating to make investments in public education and transportation.

This year, the House and Senate revisited their targeted tax relief bills, with Healey picking up the push from former Gov. Charlie Baker.

Competing bills again went into a six-person House-Senate conference committee. That panel was appointed in June, and has been negotiating in secret.

Just after 6 p.m. Thursday, the "agreement in principle" was announced in a statement issued by House Speaker Ronald Mariano and Senate President Karen Spilka, along with two of the six conferees - House Ways and Means Chairman Aaron Michlewitz and Senate Ways and Means Chairman Michael Rodrigues.

"In an effort to provide meaningful financial relief to the Commonwealth's residents and businesses, we are thrilled to announce that an agreement has been reached in principle that reconciles the differences between the House and Senate tax relief packages. We look forward to filing and taking up the conference report next week, which responsibly implements our shared goal of making Massachusetts more affordable, equitable, and competitive," the statement said.

In a statement just after 9 p.m., Gov. Healey said, "As I've said from day one, tax relief is essential for making Massachusetts more affordable, competitive and equitable. I'm pleased that the Legislature has taken this step and look forward to delivering urgently needed tax relief to Massachusetts residents and businesses."

The House tax relief package would cost the state $654 million initially and eventually rise to $1.1 billion. It calls for stepping down the short-term capital gains tax rate from 12 percent to 5 percent, and and making a change designed to make Massachusetts more attractive to multi-state companies, which are subject to a three-factor apportionment based on location, payroll, and receipts to determine how much income is taxable in Massachusetts.

Senate Democrats pushed through a $586 million package with some similarities to the House's plan -- increasing the rent cap deduction from $3,000 to $4,000, doubling the senior circuit breaker tax credit cap and increasing the earned income tax credit to 40 percent of the federal credit.

In addition to the Senate not adopting the single sales factor reform or the capital gains tax cut, the branches also differ over the size of the increase in the child and dependent tax credit. The House is seeking to raise the credit from $180 to $310 per dependent this fiscal year, and bump it up each year until it reaches $614 by fiscal 2027. The Senate bill would increase the credit to $310 per child with no future incremental increases.

The Senate also adopted proposals to increase the Low-Income Housing Tax Credit annual authorization from $40 million to $60 million, extend the brownfields tax credit until 2028, increase Title V septic credits and dairy tax credits, and double lead paint abatement credits and the statewide cap on apprenticeship tax credits. Representatives didn't include any of these smaller reform policies in their plan.

Written By Michael Norton/SHNS