The Tax Foundation

Research Areas

Massachusetts

The Facts on Massachusetts' Tax Climate

Here are some basic facts on Massachusetts' tax system and how it compares to other states:

Tax Freedom Day Arrives on April 28 in Massachusetts
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Massachusetts taxpayers had to work until April 28 to pay their total tax bill, ranking the state 6th highest nationally. That's five days after national Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states are as follows: Rhode Island, April 24 (ranked 13th nationally); Connecticut, May 8 (ranked 1st nationally); New York, May 5 (ranked 3rd nationally); New Hampshire, April 15 (ranked 35th nationally); and Vermont, April 19 (ranking 24th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Massachusetts' State/Local Tax Burden Below Average in 2007
Between 1970 and 1998, Massachusetts' state and local tax burden was generally well above the national average. Since then, it has fallen considerably. Estimated at 10.6% of income, Massachusetts' state/local tax burden percentage ranks 28th nationally, below the national average of 11.0%. Massachusetts taxpayers pay $5,419 per capita in state and local taxes, and per capita state income is $51,297.
Massachusetts' State and Local Tax Burdens, 1970-Present

Massachusetts' 2008 Business Tax Climate Ranks 34th
Massachusetts ranks 34th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Rhode Island (50th), Connecticut (38th), New York (48th), New Hampshire (7th) and Vermont (44th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Massachusetts' Individual Income Tax System
Massachusetts' personal income tax system consists of a flat rate of 5.3% on most personal income, which ranks 32nd highest nationally. Massachusetts' 2005 individual income tax collections were $1,506 per person, which was the 3rd highest in the nation, behind only New York and Maryland.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Massachusetts' Corporate Income Tax System
Massachusetts' corporate tax structure consists of a flat rate of 9.5% on all corporate income. Among states levying corporate income taxes, Massachusetts' rate ranks 4th highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $288.79 per capita, which ranked 5th highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Massachusetts Levies Sales Tax Slightly below National Median; Cigarette Tax among Highest in the Nation
Massachusetts levies a 5% general sales or use tax on consumers, slightly below the national median of 5.4 percent. State and local governments combined collect approximately $923 per capita in sales taxes, ranking 45th highest nationally. Massachusetts' gasoline tax stands at 23.5 cents per gallon, which ranks 26th highest nationally. Massachusetts' cigarette tax stands at $1.51 per pack of twenty, ranking 15th highest in the nation. The sales tax was adopted in 1966, the gasoline tax in 1929 and the cigarette tax in 1939.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Massachusetts Property Taxes among Nation's Highest
Massachusetts is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Massachusetts' localities collected $9,814,264,000 in property taxes in fiscal year 2004, which is the latest year that the Census Bureau published state-by-state data. Despite a well-known property tax limitation measure passed in the early 1980s, Proposition 2 1/2, Massachusetts' property taxes are 7th highest in the nation per capita measure. High levels of collections have been possible because the limitations in law are relatively easy to override locally. At the state level, Massachusetts collected a mere $51,000 in property taxes during FY 2004, making its combined state/local property taxes $9,814,315,000, or $1,532 per capita.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Massachusetts is a Donor State
Massachusetts taxpayers receive less federal funding per dollar of federal taxes paid compared to the average state. Per dollar of Federal tax collected in 2005, Massachusetts citizens received approximately $0.82 in the way of federal spending. This ranks the state 40th nationally and represents a fall from 1995 when Massachusetts received $0.92 per dollar of taxes in federal spending (when the state ranked 39th nationally). Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were as follows: Rhode Island ($1.00), Connecticut ($0.69), New York ($0.79), New Hampshire ($0.71), and Vermont ($1.08).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Articles from the Tax Foundation