Competitive Edge

November 2025

A Message from Chris Anderson, President of the Massachusetts High Technology Council

Sustaining Massachusetts’ leadership in innovation depends on our ability to compete for jobs, investment, and talent. These periodic competitiveness updates are vital tools for business and policy leaders alike—helping us stay informed, anticipate risks, and unite behind the reforms that will keep the Commonwealth open, dynamic, and opportunity-rich.

Massachusetts continues to enjoy world-class advantages—our concentration of research institutions, skilled talent, and innovation-driven enterprises—that other states aspire to emulate. Preserving these strengths requires vigilance and disciplined policy leadership.

To keep our members informed on the policy developments impacting the Massachusetts business climate, High Tech Council Vice President Elizabeth Mahoney continuously tracks state and national trends affecting the business climate. By spotlighting where the Commonwealth leads or lags, we help business and policy leaders focus on solutions that strengthen growth and opportunity.

In this edition, Elizabeth shares insights on recent data, emerging policy challenges, and the Council’s leadership in advancing reforms that support pro-growth outcomes for Massachusetts.

Massachusetts Falls in Tax Competitiveness Rankings

On October 30, the Tax Foundation’s 2026 State Tax Competitiveness Index was released, and ranks Massachusetts #43, down from #41 last year and #36 in 2020—placing the Commonwealth among the five states with the sharpest declines over that period.

The key driver: the 2022 adoption of a 4% income surtax, which ended Massachusetts’ flat income tax structure and pushed the state deeper into the bottom tier nationally.

2026 State Tax Competitiveness Index | Massachusetts

Category	Rank
Overall	43
Corporate Taxes	33
Individual Income Taxes	42
Sales Taxes	22
Property Taxes	48
Unemployment Insurance Taxes	45

Source: The Tax Foundation

On behalf of the Mass Opportunity Alliance (MOA)—co-founded by the Council to advance solutions to the state’s competitiveness crisis—Council President Chris Anderson urged state leaders to act, noting:

“Turning this around will require successful, coordinated efforts by private-sector leaders and policymakers to advance meaningful reforms that strengthen the state’s competitiveness.”

Advocates Double Down on Bad Tax Policy

Despite rising costs for businesses and residents, some advocacy groups are pressing new tax proposals that would make Massachusetts even more of an outlier, accelerating the loss of employers, talented workers, and high-income taxpayers to other states.

One legislative proposal would increase certain corporate taxes, targeting global income. Massachusetts already has one of the highest corporate tax rates in the country, and most other states don’t tax this category of income. Proponents claim the measure could offset federal funding cuts, but it would raise as little as $100 million—a negligible gain compared to the damage it would cause to the state’s competitiveness. Chris Anderson recently underscored these risks in remarks to The Boston Globe, citing new MOA research. The Council will host a webinar on this topic on December 11. Stay tuned for additional information and your official invitation.

Meanwhile, the Massachusetts Teachers Association is advancing a proposed “wealth tax” amendment. Details are limited, but any such tax would further erode Massachusetts’ competitiveness, encouraging high-net-worth residents to relocate. The state already has the 7th-highest top marginal income tax rate and is one of only 12 states with an estate tax.

The Council is working vigorously to prevent these initiatives from advancing.

Policy Trends in Other States

Massachusetts is not alone in facing anti-competitive tax proposals. Across the country, several states and major cities are moving toward higher income and wealth taxes—often as a solution to close budget gaps, rather than reining in spending.

Examples include:

California union files wealth tax ballot question:

The 2026 California ballot could include a proposal to amend the state constitution to impose a 5% wealth tax. One of the state’s most powerful unions is proposing a “one time” tax on taxpayers with wealth exceeding a billion dollars in 2025, with the funds to be split 90-10 between health care and education. California is ranked #48 on the Tax Foundation State Tax Competitiveness Index.

Michigan ballot proposal would establish a new income surtax:

Michigan could follow in Massachusetts’ ill-fated footsteps by abandoning its flat 4.25% income tax for a graduated tax by imposing a new surtax on high-income taxpayers. A coalition of progressive groups has proposed a constitutional amendment that would add a 5% surcharge on incomes above $500,000. Revenue from the surcharge would be dedicated to education programs. If the measure passes, Michigan (currently ranked #16 on the Tax Foundation State Tax Competitiveness Index) would replace Massachusetts as the state with the 7th–highest income tax rate.

Illinois lawmakers propose ‘billionaire tax’:

Democrats in the Illinois Legislature are proposing an unprecedented tax on unrealized gains on the assets of billionaires. This proposal, which would apply the state’s 4.95% income tax rate to such gains, is part of an extensive tax package designed to raise $1.5 billion for the Chicago Transit Authority. If passed by the Legislature, this proposal would certainly face a legal challenge as it likely violates the state’s constitution. Illinois is ranked #38 on the Tax Foundation State Tax Competitiveness Index.

Chicago mayor seeks to reinstate ‘head tax’:

Facing a $1.2 billion budget shortfall, the mayor of Chicago is proposing to tax employers for every worker they employ in Chicago. This “head tax” would require city businesses to pay a $21/month tax for each of their employees, killing job creation and investment in the city. This short-sighted idea would only raise an estimated $100 million. Chicago’s previous ‘head tax’ of $4 per employee was repealed in 2014 by then-mayor Rahm Emanuel who called it a “job killer.”

New York City’s new mayor vows to raise income and corporate taxes:

New York City’s newly elected mayor has proposed $9 billion in tax increases, including an additional 2% city income tax on incomes over $1 million and a more than 4-point increase in the state’s corporate tax to 11.5%. Top earners in New York City already pay the highest non-federal income taxes in the country when accounting for both state and city income taxes. Both proposals would require the approval of the state legislature and governor, and (for now) the Governor has indicated an unwillingness to raise taxes.

These moves echo a troubling pattern: taxing growth rather than fostering it. As the Council has long warned, Massachusetts must resist this approach and focus instead on fiscal discipline. The state budget has grown by 51% in seven years, far outpacing inflation and personal income. This is an unsustainable trend that must be reversed.

A Competitiveness Strategy for Massachusetts

Driven by private sector leadership, the Council is collaborating on and driving a multi-year strategy to restore fiscal responsibility and pro-growth policy in Massachusetts. The benefits of success will improve the environment in Massachusetts for investment, job creation, sustained state tax revenue growth, and improved quality of life for our residents. Alongside a broad coalition of business organizations and citizens, the Council has filed two 2026 ballot initiatives:

Reduce the state income tax from 5% to 4%; and
Reform the state’s tax revenue cap formula to align budget growth with inflation and wage growth, ensuring consistent and predictable taxpayer refunds.

In October, the Council’s Board formally endorsed both initiatives and the organization’s leadership role in advancing them. Research from MOA shows strong public support and projects billions in additional economic activity for the state. Analysis from Pioneer Institute confirms that after the state’s last voter-approved income tax cut in 2000, revenues quickly recovered and surpassed previous levels, even after adjusting for inflation.

These proposals mark the beginning of a renewed and sustained coalition-building effort to restore Massachusetts’ competitiveness. The Council will continue championing pro-growth reforms—such as eliminating the estate tax—while defending against harmful ideas like a new Massachusetts wealth tax. Through these initiatives, we can reestablish Massachusetts as a place where families, talent, and businesses thrive.