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H 5407

REPORT of the SPECIAL JOINT COMMITTEE on INITIATIVE PETITIONS on the INITIATIVE PETITION of JAMES JOHN STERGIOS AND OTHERS FOR THE PASSAGE OF AN ACT RELATIVE TO REDUCING THE STATE PERSONAL INCOME TAX RATE FROM 5% TO 4%. (see House, No. 5007)

194th Legislature (2025-2026) Introduced by Alice Peisch

The petitions would cut the state income tax to 4% and loosen the 62F revenue cap, weakening reserves and shifting large benefits to high earners.

See H5006 and H5007
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WeVote Research Nonpartisan
Bill Summary · H 5407

What the bill is

  • This is a Massachusetts ballot initiative report (H 5407, Session 194th) from the Special Joint Committee on Initiative Petitions.

  • It concerns two initiative petitions presented for a vote:
    1) House 5006: Relating to limiting state tax collection growth and returning surpluses to taxpayers.
    2) House 5007: Relating to reducing the state personal income tax rate from 5% to 4%.

  • The committee’s Majority Report recommends that the General Court take no action on both petitions.

Main purpose and intent

  • The petitions aim to enact significant changes to Massachusetts fiscal policy:
    • Lower the state personal income tax rate from 5% to 4%.
    • Modify the Chapter 62F revenue growth limit formula to affect how much revenue the state can collect and when refunds or credits are triggered.
  • The committee’s assessment is that, taken together, these changes would weaken the state’s ability to weather economic downturns, reduce reserves, and potentially trigger refunds after recessions, with disproportionate benefits to high-income earners.

Key provisions and changes proposed

1) Reducing the state personal income tax rate (Petition 25-18 / House 5007)

  • Proposes lowering the state income tax rate from 5% to 4%.
  • Expected immediate fiscal impact:
    • Projected loss of more than $5.3 billion in state revenues in the first full fiscal year after implementation.
    • The revenue reduction would be large relative to key state aid programs:
    • Approximately 406.7% of FY 2026 Unrestricted General Government Aid to cities and towns.
    • About 73.1% of FY 2026 Chapter 70 education aid.
  • Distributional effects:
    • Tax savings would be greatest for high-income earners (e.g., several figures cited for different income scenarios):
    • Approximately $10,744 yearly savings for some high earners at taxable income above certain thresholds.
    • For a full-time, married worker earning $25/hour, about $381/year.
    • For a married couple earning $80,115, about $713/year.
    • Capital gains tax rate would drop from 8.5% to 4% for short-term gains.
    • Lower- and middle-income residents with little investment income would see relatively small savings.

2) Revising Chapter 62F revenue growth limit (Petition 25-17 / House 5006)

  • Chapter 62F was designed as a budget stabilization mechanism to limit revenue growth and provide credits if revenues exceed the cap.
  • Proposed changes:
    • Include revenues from the Fair Share Amendment in calculating the 62F limit.
    • Change the cap calculation to be based on actual revenue collected in the previous year, rather than the current formula tied to prior-year growth.
  • Public policy concern noted by the committee:
    • These changes would impede economic resilience during downturns, reducing the ability to fund essential services and the Stabilization Fund (Rainy Day Fund), especially in bad years.

Who would be affected

  • State government and services:
    • Reduced general revenues would constrain funding for roads, bridges, schools, safety-net programs, and other core state functions.
    • Potentially smaller Stabilization Fund reserves to weather recessions.
  • Taxpayers:
    • High-income earners would see the largest tax savings under the proposed income tax cut.
    • Middle- and lower-income residents would see smaller, less predictable benefits.
  • Local government funding:
    • Unrestricted General Government Aid and Chapter 70 education aid could be materially affected due to reduced state revenues.
  • Overall fiscal stability:
    • The combination of lower tax receipts and a looser 62F cap could weaken the state’s ability to respond to economic downturns.

Procedural and timeline aspects

  • Legal framework:
    • Article 48 of the Massachusetts Amendments governs initiative petitions. The Attorney General certifies petitions for form; the Legislature can only approve or reject as submitted, with no amendments.
  • Hearing and review:
    • The Committee held hearings on March 30, 2026, and reviewed testimony and submissions through March 2026.
    • Public records and full hearing materials are available to the public.
  • Decision:
    • On May 4, 2026, a majority of the Special Joint Committee recommended taking no action (i.e., not advancing either petition to enactment).

Summary assessment

  • The committee concludes that enacted together, the two petitions would significantly diminish the Commonwealth’s capacity to manage revenue volatility, fund essential programs, and maintain reserves during economic stress, while providing outsized benefits to million-dollar earners.
  • The report emphasizes that the Attorney General certified the petitions for form, but their broader constitutionality and policy implications were not adjudicated by the Attorney General at this stage.

Sponsors and oversight

  • Co-sponsor: Alice Peisch.
  • Committee: Special Joint Committee on Initiative Petitions.
  • The Majority Report was signed by a bipartisan group of senators and representatives listed in the document.

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

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