Taxes are the primary way we pay for the things that we do together through government. As this Facts-At-A-Glance details, overall, the Massachusetts tax system is regressive, collecting a larger share of household income from lower-income households than it does from upper-income households.
Beginning in 1998, a number of significant changes were made to the Massachusetts tax code–including a series of phased cuts to the state personal income tax. These cuts have reduced our capacity to fund essential services.
Overall, the level of taxation in Massachusetts is in the middle of the pack when compared to the rest of the country. The Taxachusetts label is a legacy of the 1970s – and at that time the label had a basis in reality. Since the late 1970s, tax policy in the Commonwealth has changed dramatically, as described in this Facts-At-A-Glance.
This Facts-At-A-Glance describes a recent US Census report that compares how much is collected in taxes in each state to help pay for all those things we do through government. It finds that Massachusetts ranks in the middle of the pack.
The Governor recently announced the need to cut funding for school transportation, job training, health care, and other investments that protect the health of our people and our economy. One of the reasons for these cuts is the triggering of an automatic tax cut caused by a twelve year old law. This tax cut, which primarily benefits the highest income taxpayers, will cost the Commonwealth $140 million a year. It is part of a series of automatic income tax rate cuts that together will cost the Commonwealth $350 million this year.
The economic security of working families depends on reliable access to opportunities that offer good incomes and that allow workers to share in the benefits of economic growth. Unfortunately, data made available today by the U.S. Census Bureau show that four years into an economic recovery many working families across the nation and in Massachusetts have seen only very modest gains.
Both the minimum wage and income enhancement programs like the Earned Income Tax Credit (EITC) are important tools for reducing poverty and boosting incomes among low-income working families. Because these two tools operate in different ways, however – and therefore, in part, have differing effects on different groups of low-income workers – it is important that each remains strong. EITC increases are most effective as a supplement to and not a substitute for a strong minimum wage.
Tax rates are only one among many factors that businesses weigh when deciding where to locate or expand. In Massachusetts, state and local business taxes are lower than in most other states.
A review of employment data for the restaurant industry shows little connection between a state’s tipped minimum wage level and its rate of job growth. High tipped minimum wage levels do not produce slow job growth in the relevant industry.
Some cities and towns have higher concentrations of the labor force employed in low-wage work than others. Raising the minimum wage would tend to have a greater impact in these areas, particularly since workers who receive wage increases are likely to spend a portion of those increases locally.