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Bill

S 1974

An Act aligning the long-term capital gains tax rate with the short-term capital gains tax rate

194th Legislature (2025-2026) Introduced by Jamie Eldridge

Massachusetts bill would tax long-term capital gains at standard income tax rates instead of preferential rates, potentially raising revenue but risking reduced investment activity and competitiveness.

Reporting date extended to Thursday June 25, 2026
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Bill Summary · S 1974

Legislative bill overview

S 1974 proposes to eliminate the preferential tax treatment of long-term capital gains in Massachusetts by taxing them at the same rate as short-term gains and ordinary income. Currently, long-term capital gains (assets held over one year) receive lower tax rates than ordinary income; this bill would subject all capital gains to Massachusetts' standard income tax rate.

Why is this important

Capital gains taxation significantly affects investment decisions, wealth accumulation, and state revenue. This change would increase tax liability for investors and wealthy individuals while potentially raising state revenue, but could also influence investment behavior and competitiveness relative to neighboring states. The policy reflects broader debates about tax progressivity and whether capital income should be treated differently than wage income.

Potential points of contention

  • Economic competitiveness: States with lower capital gains taxes may attract investors and businesses; Massachusetts could see capital flight or reduced investment activity if rates increase substantially
  • Burden on retirement and middle-class investors: While often characterized as a "wealthy" tax, many middle-class residents hold long-term investments in 401(k)s, IRAs, and brokerage accounts that could face higher taxes
  • Revenue expectations vs. behavioral response: Higher tax rates may generate less revenue than projected if investors shift behavior, sell fewer appreciated assets, or relocate to lower-tax jurisdictions

Compiled from official sources — confirm details with the bill’s official record.

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