Massachusetts Part B Income-tax Rate Set to Decrease
BOSTON — Gov. Charlie Baker and Lt. Gov. Karyn Polito announced that the final economic trigger was met in order to lower the state’s income tax from 5.15% to 5.10%. The income-tax cut for all Massachusetts residents will become effective on Jan. 1.
“Meeting the requirements needed to reduce the income-tax rate is a sign that the Massachusetts economy remains strong,” Baker said. “Allowing citizens across the Commonwealth to keep more money in their pockets will allow the state’s economy to continue growing in 2016.”
Added Polito, “the will of the voters has persevered. It’s been 15 years since the voters first made this decision, and every chance we get to provide more discretionary income is a good day for the Commonwealth and the taxpayers.”
Kristen Lepore, secretary of the Executive Office for Administration and Finance, noted that “the fiscal year 2016 budget revenue assumed effects of the lower tax rate to 5.10% and has been accounted for in the balance sheet. This is good news for the taxpayers with no new impact on the state’s fiscal outlook.”
A ballot initiative passed in 2000 called for the state’s income tax to be reduced to 5% over time. Legislation was passed in 2002 that tied reducing the tax rate by 0.05% each tax year (until the Part B income tax rate is 5%) to certain economic triggers. First, the inflation adjusted growth in baseline tax revenues for the preceding fiscal year has to exceed 2.5%. The second trigger, completed on the 15th of each month between September and December, certifies that the inflation-adjusted growth in baseline tax revenues over the previous three months of the current calendar year compared to the same periods of the prior calendar year is greater than zero. Once the statutory triggers are met, the rate is lowered by 0.05% until it reaches 5% percent.
The charitable deduction will be restored the year after the tax rate is lowered to 5%. The last time all growth thresholds were met was in 2014.