Income tax rate to hold at 5.1 percent
David Ohmer via Flickr
The gold dome of the Massachusetts State House where tax collections have been strained.
For the first time in four years, Massachusetts taxpayers will not see the tax rate they pay on income drop come January after state revenues failed to grow sufficiently to meet the first trigger for a reduction.
Department of Revenue Commissioner Michael Heffernan wrote a letter to Administration and Finance Secretary Kristen Lepore and House and Senate budget leaders on Wednesday confirming what had been expected -- the state income tax will hold steady in 2017 at 5.1 percent.
Heffernan said that inflation-adjusted baseline tax revenues for fiscal year 2016, which ended on June 30, grew by 0.975 percent over the previous year, well shy of the 2.5 percent growth required under the law to meet the first of five tests required to trigger an income tax reduction.
Total tax collections in fiscal 2016 of $25.267 billion were up by $550 million or 2.2 percent from fiscal 2015, according to DOR.
After tax collections in 2016 repeatedly fell below benchmarks, the Baker administration and legislative leaders adjusted their expectations and began to assume the the income tax rate would not change next year, freeing up $80 million for lawmakers to spend in this year's state budget.
Come January, it will be the first time since 2013 that the tax rate has not ticked down.Voters in 2000 passed a ballot law directing the state to lower the income tax rate to 5 percent over three years, but in 2002 with the income tax rate at 5.3 percent the Legislature blocked the final decrease to help it deal with an economic downturn that was putting a strain on the state budget and services.
Instead, the House and Senate agreed to a new plan to slowly ratchet the income tax rate down to 5 percent by half of a percentage point a year, provided that certain economic triggers were hit.
The income tax rate fell to 5.25 percent in 2012, and started a more steady decline in 2014 when over three consecutive years it fell to its current perch at 5.1 percent.
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