As Massachusetts policymakers seek to build a more equitable and resilient Commonwealth, the recent corporate tax changes in the federal “One Big Beautiful Bill” Act (OBBBA) pose a significant threat to the stability of the state budget. In the face of deep federal cuts to crucial programs that support Massachusetts families, the state must proactively protect its own fiscal stability by opting out of the five most costly and regressive corporate tax provisions of the new federal law. Otherwise, these changes will cost the Commonwealth $463 million in lost revenue this fiscal year alone. Opting out, also referred to as “decoupling,” from these costly changes will help prevent deeper cuts to public programs and ensure a fairer Commonwealth where everyone can thrive.
Protecting Massachusetts’s values in the face of the federal agenda
The entire Massachusetts delegation to Congress voted against the new federal law, which enacts a suite of changes that disproportionately benefit the wealthy and exacerbate economic inequities nationwide. These include devastating cuts to MassHealth and food assistance that helps feed one in six Massachusetts residents. While the Commonwealth cannot single-handedly reverse these damaging federal policies, it has the authority to prevent federal tax changes from automatically becoming part of the state’s own tax code. Massachusetts has a history of opting out of federal policies that do not serve our interests or harm our most vulnerable populations. Lawmakers must act quickly and do it again. In this instance, it will keep our state’s tax code aligned with equity values, while preserving resources for the difficult road ahead. We are already seeing other states – Michigan and Rhode Island so far – take action to opt out of federal changes to protect their state’s revenue.
Preserving critical revenue and a fairer tax code
According to Massachusetts Department of Revenue projections, all of the newly passed federal tax changes will reduce Massachusetts tax collections by $664 million in Fiscal Year 2026. By imminently passing new state laws to address at least the five most costly corporate federal tax provisions, Massachusetts would protect $463 million in revenue that would otherwise be lost this fiscal year.
Preserving this revenue is vital for several reasons:
- Protect against even more harmful federal cuts: It will help the state weather the storm of harmful federal cuts to Medicaid, Supplemental Nutrition Assistance Program (SNAP), and other federal programs and grants that will directly harm Massachusetts residents.
- Sustain state investments: By preventing further losses to the Massachusetts state budget, it will help protect more of the critical state-funded services—from education and healthcare to housing and transportation—that Massachusetts families and businesses rely on.
- Invest in equity: The federal tax changes disproportionately benefit the highest income taxpayers and corporate shareholders. Passing state law to prevent these changes will ensure Massachusetts can continue making progress toward a fairer tax system that promotes shared prosperity. In recent years, we have seen major strides in state tax equity, such as targeted tax relief and measures ensuring high-income earners pay their fair share. Preventing some of these additional corporate tax breaks is essential to this work. Without legislative action, our state will regress back to a less fair tax system.
Acting with urgency to prioritize people, not profits
If Massachusetts does not act quickly, the new federal tax changes will automatically take effect in state law. It will be more difficult to reverse these cuts in the future. We urge the Massachusetts legislature to prioritize the economic security of its residents and the stability of its budget over extraordinary tax cuts for corporations.
