BOSTON — Gov. Charlie Baker is pushing back on lawmakers who want to further delay a tax deduction for charitable donations approved by voters more than two decades ago.
The Democrat-controlled Legislature wrote another two-year postponement of the law into the state’s nearly $48 billion budget.
Baker signed the budget on Friday but vetoed that provision. He said the state’s financial situation has improved, and he doesn’t 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 in a memo to lawmakers.
Under the law, individuals 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 the voters.
Two years after its passage, 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.
For the just-started fiscal year, budget writers estimated that postponing the law until 2023 would free up about $64 million.
However, the Baker administration says the state’s accounts are healthier than expected, and another delay isn’t necessary.
They cite an upgraded $34.3 billion tax revenue forecast for the fiscal year that began July 1. That’s an increase of $4.2 billion over estimates earlier this year, largely due to better-than-expected tax collections and an influx of federal pandemic relief money.
The unexpected windfall allowed the state to forgo a planned drawdown on its reserve funds — and even add another $1.1 billion to the kitty.
Groups that work with nonprofit groups say the tax deduction law has been delayed long enough. They welcomed Baker’s veto and urged lawmakers not to override it.
“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.”
He said most people likely to use the deduction live in low- and middle income households that often donate smaller amounts to charity but haven’t been able to get a state income tax deduction.
“This is a universal deduction available to everybody,” he 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 The Salem News and its sister newspapers and websites. Email him at email@example.com.