Policy Agenda: Taxation
Fair, predictable and competitive tax policies are a critical component of an economic climate that can support Massachusetts’ high quality of life and a thriving private sector. The Commonwealth’s dynamic and resilient technology sector creates enormous economic opportunities for employees and investors. In turn, economic activity related to technology employment and industry generates significant revenues to support the Commonwealth’s investments in key infrastructure, programs and services.
The taxation and spending policies of individual states, both the decisions they make and how they make them, are an increasingly important differentiator in the global competition for job creation and capital investment. Over the past several decades, Massachusetts leaders have worked hard to shed Taxachusetts by ensuring the state’s tax policies were not a material deterrent to employer expansion and investment in the Commonwealth. Today, many respected rankings of business and individual tax burdens place Massachusetts firmly in the middle of the 50 states.
The positive results of this strategy and approach are apparent. Low unemployment, record state tax revenues and a steadily expanding state economy.
Any shift in state policy that damages the environment for innovation and investment and weakens private sector performance will result in significant state budget challenges in Massachusetts in the not-to-distant future. This is particularly true in the event of any weakness in the economy in general as a result of a national recession.
Key Data and Metrics
- The Commonwealth collected $29.6 billion in tax revenue in FY19, $4 billion more than it collected in FY17 and $11 billion more than it did in FY09.
- State tax revenues have increased by 58% over the past decade, three times the inflation rate of 19% as measured by CPI.
- Massachusetts had annual budget surpluses in excess of $1 billion in each of the last 2 fiscal years.
- The top 20% of Massachusetts earners paid 73% of all income taxes collected by the state and had average effective tax rates of 4.7%-nearly double the average effective rate paid by the bottom 40% of earners.
- Massachusetts ranks 36th in State Business Tax Climate quality. (Sources: MATTERS/Tax Foundation, Mass. Department of Revenue, Mass. Executive Office of Administration and Finance.
The Council supports tax policies that will enhance the ability of Massachusetts companies to compete globally, including the imposition of corporate and business entity taxes at competitive rates and the expansion of market-based apportionment rules for Massachusetts companies.
The Council opposes efforts to increase taxes on business and investment, including the proposed amendment to permanently embed increased income tax rates in the Massachusetts Constitution where future lawmakers would be unable to modify them in the face of changing economic circumstances and evolving public needs.
Read the Council’s April 11, 2019 Testimony in Opposition to Proposed Income Tax Constitutional Amendment here.
Read the Council’s May 8, 2019 Letter to Legislators Opposing the Proposed Income Tax Constitutional Amendment here.
Read the Council’s June 11, 2019 Letter to Legislators Opposing the Proposed Income Tax Constitutional Amendment here.
Read the Council’s October 28, 2019 Letter Supporting Preservation of Business Interest Deduction here.