State Income Tax

UPDATE

May 19, 2009. The Massachusetts Senate voted to defeat a bill proposed by Senator Sonia Chang-Díaz to roll the state income tax back to 5.95%, and would have brought in roughly $1.3 billion in additional revenues per year. (Tally Sheet: 28-11)

March 4, 2009. In an information packet, the [Massachusetts Senior Action] Council... comes out in favor of “progressive options to raise revenue,” including increases to the state income tax, alcohol tax and gas tax. [State House News Service]

BACKGROUND

The personal income tax in Massachusetts is, constitutionally, a flat tax. Since 1977 the income tax rate has ranged from 6.25 Percent to 5 percent and is currently set at 5.3 percent.

The personal income tax tends to be a very good tax from the standpoint of adequacy. A personal income tax generally grows with personal income, allowing revenue to keep pace with increases in costs. It is also excellent from the standpoint of horizontal equity - people with the same taxable income will pay the same taxes. The majority of personal income tax collections are from wages and salaries, which are more stable than those collected from capital gains, bonuses, etc.

Mechanisms such as exemptions, deductions, circuit breakers and credits are incorporated into tax law to make it more progressive. For example, the earned income tax credit, or EITC, reduces the share of taxes paid by people with lower income; the personal exemption means that a fixed amount of all incomes are not subject to the income tax.

[More info from MassBudget on the Personal Income Tax]

Attempts in Massachusetts to pass a constitutional amendment for a graduated income tax have all failed, most recently in 1976 and 1994.

2000. Voters approved a ballot initiative to cut the state income tax from 5.95 percent to 5 percent over three years. Lawmakers eventually froze the rate at 5.3 percent because of the dramatic loss of revenue and inability to fulfill budget requirements.

2002. Voters defeated a proposal to eliminate the state income tax in Massachusetts. The ballot question failed by a three percent margin. (48% voted no, 45% voted yes).

2008. Voters defeated a proposal to eliminate the state income tax in Massachusetts. The proposal was to halve the income tax for 2009 and then to eliminate it completely the following year. Such a measure would have resulted in the loss of approximately $10.4 billion, or 40%, of the Commonwealth’s revenue. (approximately 70% voted no, 30% voted yes)

ADDITIONAL RESOURCES

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