In Fiscal Year (FY) 2013, Massachusetts collected $38.6 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Massachusetts taxpayer can afford this level of taxation.
As shown in Chart 1 below, Massachusetts’s state and local tax burden (tax collections divided by personal income) was the twenty-first highest in the nation for FY 2013 at 10.2 percent—this is -1 percent below the national average of 10.3 percent. As shown in Chart 2, Massachusetts’s tax burden has grown 34 percent to 10.2 percent in FY 2012 from 7.6 percent in FY 1950.
Massachusetts’s tax burden relies heavily on the income tax with a high individual income tax burden (3.2 percent, 9th highest), and corporate income tax burden (0.5 percent, 8th highest). Offsetting the income tax is a low sales tax burden (1.4 percent, 42nd highest), and all other taxes burden (1.4 percent, 45th highest). Interestingly, their low sales tax burden is likely due to the tax competition provided by sales-tax-free New Hampshire.
Of course, Massachusetts’s tax burden would be significantly if it were not for the enactment of Proposition 2 ½--which was inspired by California’s Proposition 13. Proposition 2 ½ limits property tax revenue to 2.5 percent of assessed value of all taxable property and the growth in property tax revenue cannot exceed 2.5 percent.
As a result, Massachusetts’s property tax burden declined significantly after Proposition 2 ½ went into effect in 1982. In fact, between FY 1981 and FY 1983 the property tax burden fell by -26 percent to 3.9 percent in FY 1983 from 5.2 percent in FY 1981. It has remained in the 3 percent range ever since.
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Massachusetts—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The Massachusetts counties with the highest local government tax burden include: Nantucket County, MA (9.2 percent), Dukes County, MA (7.9 percent), and Barnstable County, MA (5.1 percent). The Massachusetts counties with the lowest local government tax burden include: Hampshire County, MA (3.4 percent), Bristol County, MA (3.5 percent), and Worcester County, MA (3.5 percent).
J. Scott Moody has over 18 years as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.