The Massachusetts Budget and Policy Center recently reported that Massachusetts ranks 25th among states for state and local property taxes paid as a share of total personal income. In FY 2010, the amount of state and local taxes collected by the commonwealth as a share of total personal income was 10.2 percent.
Among the changes to our state’s tax code since 1998, three were enacted that reduced state revenues significantly. The income tax was reduced from 5.95 percent to 5.3 percent, interest and dividend income tax was reduced from 12 percent to 5.3 percent, and the personal exemption for single and married filers was doubled. The center estimates that these changes resulted in a revenue loss of $2.5 billion annually in 2013 dollars. Beginning in 2001, Massachusetts witnessed deep cuts to its state budget, including (adjusted for inflation); local aid, 46 percent; higher education, 31 percent; public health care, 25 percent; early education, 28 percent; and infrastructure and economic development, 17 percent.
The shortfall in state revenues forced communities to rely upon property taxes to fill the gap. Given the aging Berkshire demographic, the property tax is the principal and often contentious source of raising revenue.
Gov. Patrick has proposed a number of changes to the state’s tax code to raise revenue while making our state’s tax system more fair. The two most important changes are raising the personal income tax rate from 5.25 percent to 6.25 percent, coupled with decreasing the sales tax from 6.25 percent to 4.5 percent. Overall, the governor’s proposal would increase state revenue by some $1.2 billion annually. The additional revenue would target a number of line items including education, transportation, health care and local aid.
More importantly, increasing the income tax and reducing the sales tax promotes a tax system which is fair and progressive. Currently, our state’s structure is regressive, as low- and middle-income earners pay a larger share of their income in taxes than higher income earners. In 2010, households earning $20,000 to $39,000 per year (20 percent of earners) paid more than 9 percent of their income in state and local taxes, while households earning $217,000 to $580,000 per year (4 percent of earners) paid approximately 8 percent of their income in state and local taxes.
Reducing the sales tax is more fair and reduces the regressive nature of this tax. Lower- and middle-income earners have less disposable income after paying for goods and services, and a sales tax imposes a greater tax upon their earnings in comparison to higher-income earners. In 2010, the center reporters that people earning $20,000 to $39,000 per year paid 1.6 percent of their income in sales taxes. People earning $217,000 to $580,000 per year paid 0.6 percent of their income in sales taxes.
Increasing the state income tax is progressive as higher income earners pay a fairer share of their income. In 2010, the center reported that people earning $20,000 to $39,000 per year paid 2.1 percent of their income in state taxes. Those earning $217,000 to $580,000 per year paid 4.2 percent of their income in state tax.
The fair and progressive changes outlined by Gov. Patrick merits the support of our legislative and municipal representatives. The quality of life in our commonwealth and in our communities resides with the well-being of our people and in our commitment to fund public services fairly and adequately.
ANTONIO P. PAGLIARULO