The data debunk the Taxachusetts myth
Taxes in Massachusetts aren’t high. Compared with the rest of the country, they’re pretty average. And among New England states, only New Hampshire has a lower overall tax rate.
Says who? The Census Bureau, which regularly releases details on taxes collected by state and local governments. The latest batch covers 2015, slightly stale but still largely accurate, given that Massachusetts hasn’t pursued any recent tax changes.
For every dollar people earned in Massachusetts, about 10.4 cents went to state and local taxes — in line with the national average of 10.3 cents. There are 18 states with higher overall tax rates, and 31 with lower rates.
To be clear, years ago Massachusetts really was a high-tax state. Over time, however, limits on property taxes and the big income tax reductions of 1998 through 2002 completely changed Massachusetts’ tax profile. Taxachusetts has now been supplanted by Taxawii and Tax York.
Why does the old stereotype stick? Partly it’s about the inertia of ideas. Outdated notions often stay locked in our heads, long after they’ve been disproved or debunked. (Anyone else still think twice before swimming after a big meal?)
There's another reason we can’t shake the Taxachusetts slur. Overall, taxes aren’t high — when you include things like property and sales tax — but our income tax rate is. Sometimes, that becomes the focus.
Focusing on income taxes is too narrow a vantage, though, making it impossible to see the state and local tax system as a whole. Yes, Massachusetts has a relatively high income tax rate but it’s offset by low sales taxes.
Elsewhere, you find the opposite. Nevada residents have no income tax yet sales taxes are so high that people end up paying about 10 cents of every dollar — just like here.
To give a sense of just how far Massachusetts’ taxes have fallen, consider what would happen if voters decide to pass the so-called millionaire’s tax. That’s a major tax measure, designed to raise roughly $2 billion per year. But it would increase the overall tax rate only to around 10.8 percent — still second-lowest in New England, and 15th among US states.
In the end, though, this “how high are our taxes” question is of secondary concern. More important is whether we have found the right balance between the money we raise with taxes and the programs we’ve decided to run via state and municipal governments.
Here, the answer is a pretty emphatic no. A decade of budget deficits suggests there’s a real and persistent mismatch between tax revenues and spending commitments.
How we decide to fix this imbalance — with tax increases or spending cuts — may be one of the most consequential political debates in the Commonwealth.
And it matters, for this debate, whether we start from the assumption that we are already living in Taxachusetts or trust the census data, which say our state and local taxes are barely above average.