Background on Elimination of the State Income Tax
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 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.
Attempts in Massachusetts to pass a constitutional amendment for a graduated income tax have all failed, most recently in 1976 and 1994.
In 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.
There is currently a proposal to eliminate the income tax in Massachusetts which will appear on the ballot in November 2008. The proposal is to halve the income tax for 2009 and then to eliminate it completely after that. Such a measure would result in the loss of approximately $10.4 billion, or 40%, of the Commonwealth’s revenue.
A similar proposal was on the ballot in 2002 and failed by a three percent margin. (48% voted no, 45% voted yes).
For additional information see:
Mass Teachers Association
Massachusetts Taxpayer Foundation from their 2002 campaign