Despite the gripes and stereotypes, taxes in Massachusetts just aren’t that high. Not compared to other states, anyway.
Across New England, only New Hampshire has lower state and local taxes. And compared to the United States as a whole, Massachusetts taxes are below average.
Just 10 percent of the money people earn in Massachusetts ends up among the tax receipts of cities, towns, and state government, according to the latest analysis of state and local finances from the US Census Bureau.
What kinds of taxes are you talking about?
All of them. Income tax, sales tax, property tax, gas tax, corporate taxes, local taxes, state taxes, you name it. Any tax that ends up in the coffers of municipalities or state governments is included in this analysis.
With a lens this wide, you can get a picture of the full tax system. And you can compare taxes across states, even when they raise money in different ways.
Nevada, for instance, has no personal income tax, so come April 15, there’s no need to send checks to state tax agents. But that doesn’t mean Nevada residents end up paying less in taxes. In fact, they pay about the same amount as Massachusetts residents — 9.9 cents of every dollar, compared to 10.1 in the Bay State — but they make those payments in other ways, like higher sales taxes.
Who has the highest tax rates? And the lowest?
Leading the pack, with the highest overall taxes in the country, are two outliers, Alaska and North Dakota, which draw abundant tax revenue from the oil and gas industries that make up such an outsized part of their economies.
Next on the list are New York, Hawaii, Maine, and Vermont, which collect more than 12 cents of every dollar earned.
At the other end of the spectrum, New Hampshire joins a host of states across the South and the Western Plains, where state and local taxes amount to less than 9 cents of every dollar.
Do liberal states tend to tax more?
There does seem to be a connection between taxes and political leanings. Many of the states with the highest overall tax rates have strongly liberal legislatures.
California has the most liberal legislature in the country — according to the rankings assembled by political scientists at Georgetown and Princeton universities — and it ranks 13th in terms of taxes collected. Vermont and New York, both among the top six in tax collections, have the sixth and seventh most liberal legislatures.
Massachusetts is a clear exception to the trend, with the second most liberal legislature but coming in 24th in terms of taxes.
Also, there’s a hitch in the “tax-and-spend” stereotype. Just because liberal states tend to have higher taxes doesn’t mean they spend more.
Kentucky, Alabama, and Montana all have strongly conservative legislatures, with relatively low levels of taxation. Yet they rank among the states with the highest government spending. One reason is because they get a lot of aid from the federal government, including for social welfare programs like Medicaid.
With middling taxes, does Massachusetts lack money for public investments?
There’s no “right” level of government spending. Deciding whether to raise taxes and invest in core services like schools and child care — or reduce taxes and put more money in people’s pockets — is a political decision, determined by the preferences of citizens and lawmakers.
Currently, Massachusetts doesn’t spend all that much through state and local government — less than you find in 31 other states. Relative to the size of our economy, the Bay State ranks dead last in spending for highways, roads, and bridges, and comes out among the bottom 10 in terms of higher education spending.
Is there a lesson in these numbers?
Massachusetts may be a very liberal state, but it hardly takes a tax-and-spend approach to governance. Taxes are low, compared to other states, and government spending is even lower.
If Massachusetts’ tax system looked more like the rest of New England’s, city and state politicians would have an additional $5 billion to $7 billion to invest in schools, roads, and other civic priorities.
Then again, if we followed New Hampshire’s low-tax approach, we could pare government and put billions back in people’s pockets.