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Massachusetts Lawmakers Examine “Fairness” of State Tax Code

Monday, March 03, 2014

 

Recommendations from Massachusetts' Tax Fairness Commission may arrive dead in the water when they're presented to lawmakers on Monday.

Highlights of the commission's draft report last week included the institution of a graduated income tax — a change necessitating a constitutional amendment, and one that has been defeated in Massachusetts before.

Commission looks at who pays, how much

Established by the Legislature last year, the bipartisan commission was charged with analyzing and focusing on the equity of current tax policies. The 15-member body found the “overall tax system in Massachusetts is regressive, meaning middle- and low-income taxpayers pay a larger share of their income in taxes than high-income taxpayers.”

The commission reports the share paid in state and local income taxes was inversely proportional to households' incomes: the bottom 20 percent of households paid 10 percent while the top 1 percent of earners paid 4.9 percent.

That regressivity is largely because of property and sales tax, areas where lower income households spend a greater share of their income. While Massachusetts has a flat personal income tax, various exemptions, deductions, and credits create some relief for lower wage workers.

Pushback against graduated income tax

Responding to the commission's recommendations, Barbara Anderson with Citizens for Limited Taxation called the graduated income tax an attempt to “rig the Massachusetts Constitution in favor of easy income tax hiking.”

“A graduated income tax is a tool to divide and conquer taxpayers, hiking taxes one bracket at a time,” said Anderson, CLT's executive director. “By targeting a single bracket, enough critical mass will never be reached for effective tax resistance. And, without legislative cooperation, a constitutional amendment is forever.”

Anderson's organization was founded in 1974 to oppose a graduated income tax proposal that failed at the polls in 1976.

Because of a 1915 amendment to the state's Constitution requiring a tax be “levied at a uniform rate throughout the commonwealth upon incomes derived from the same class of property,” a graduated income tax change necessitates a public referendum.

The proposal has been voted down five times: in 1962, 1968, 1972, 1976, and 1994, each time by at least a two to one margin.

Massachusetts in the minority of flat tax states

Two-thirds of states have a progressive income tax today according to a recent tally by the Federation of Tax Administrators, looking at state rates at the beginning of this year. Eight states have a flat income tax versus 33 (plus the District of Columbia) that have separate rates based on income brackets. (Seven have no income tax, while two only tax dividends and interest income).

While Massachusetts currently has a 5.2 percent income tax on paper, that percentage is not paid at any income level because of exemptions, deductions, and credits: The bottom 20 percent (earning less than $21,000) contribute 0.7 percent of their income toward state and local taxes while top earners pay 4.5 percent.

Commission not unified with proposals

Members of the commission voted individually on each proposal at its final meeting last week.

Michael Widmer, a member of the committee and president of the Massachusetts Taxpayers Foundation, voted against the graduated income tax measure, saying it would undercut the creation of jobs and be counterproductive toward the goal of a more competitive economy.

A majority supported a package of reforms to reduce the tax burden on low- and middle-income households (which included an increase to the state's earned income tax credit, an expansion of the property tax circuit breaker to include low-income households, and a doubling of current exemptions — all offset by an increase in the flat income tax rate).

Members of the commission also supported an online sales tax, meanwhile, that would seek to collect revenue from all Internet sales should Congress implement that requirement.

Some of the commission's recommendations echo proposals by Gov. Deval Patrick last year, including an increase in the income tax and personal exemptions, which were not acted upon in the Legislature.

Taxes a small percentage of cost of business

Gregory Sullivan, a member of the commission and research director of the Pioneer Institute, recommended studying ways to increase economic competitiveness through an expanded research and development tax credit and lower corporate tax rate, but that proposal was not picked up.

The commission reported the average cost of state and local taxes in Massachusetts at 2 percent of the total cost of business, while employee compensation accounts for between 40 and 80 percent of expenses. “Therefore, a simple reduction in the corporate tax rate is unlikely to lead to significant change in the Commonwealth,” the report concludes.

 

Related Slideshow: Central MA Unemployment Rates #72 - #1

Here are the unemployment statistics for each town in Central Mass, ranked from least to most-

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#72

Harvard

Unemployment rate, August 2013: 4.4%

Unemployed: 140

Employed: 3,059

Total workforce: 3,199

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#71

Hopkinton

Unemployment rate, August 2013: 4.7%

Unemployed: 369

Employed: 7,523

Total workforce: 7,892

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#69 (Tie)

Berlin

Unemployment rate, August 2013: 4.9%

Unemployed: 79

Employed: 1,520

Total workforce: 1,599

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#69 (Tie)

Hopedale

Unemployment rate, August 2013: 4.9%

Unemployed: 159

Employed: 3,074

Total workforce: 3,233

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#67 (Tie)

Bolton

Unemployment rate, August 2013: 5.1%

Unemployed: 147

Employed: 2,733

Total workforce: 2,880

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#67 (Tie)

Southborough

Unemployment rate, August 2013: 5.1%

Unemployed: 257

Employed: 4,813

Total workforce: 5,070

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#66

Marlborough

Unemployment rate, August 2013: 5.5%

Unemployed: 1,283

Employed: 21,909

Total workforce: 23,192

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#65

Northborough

Unemployment rate, August 2013: 5.6%

Unemployed: 432

Employed: 7,259

Total workforce: 7,691

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#62 (Tie)

Mendon

Unemployment rate, August 2013: 5.7%

Unemployed: 196

Employed: 3,218

Total workforce: 3,414

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#62 (Tie)

Princeton

Unemployment rate, August 2013: 5.7%

Unemployed: 107

Employed: 1,764

Total workforce: 1,871

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#62 (Tie)

Topsfield

Unemployment rate, August 2013: 5.7%

Unemployed: 176

Employed: 2,910

Total workforce: 3,086

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#61

Boylston

Unemployment rate, August 2013: 5.8%

Unemployed: 134

Employed: 2,167

Total workforce: 2,301

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#58 (Tie)

Shrewsbury

Unemployment rate, August 2013: 5.9%

Unemployed: 1,084

Employed: 17,152

Total workforce: 18,236

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#58 (Tie)

Sterling

Unemployment rate, August 2013: 5.9%

Unemployed: 256

Employed: 4,112

Total workforce: 4,368

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#58 (Tie)

Westborough

Unemployment rate, August 2013: 5.9%

Unemployed: 525

Employed: 8,415

Total workforce: 8,940

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#56 (Tie)

Sturbridge

Unemployment rate, August 2013: 6.0%

Unemployed: 306

Employed: 4,763

Total workforce: 5,069

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#56 (Tie)

Upton

Unemployment rate, August 2013: 6.0%

Unemployed: 241

Employed: 3,752

Total workforce: 3,993

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#53 (Tie)

Douglas

Unemployment rate, August 2013: 6.1%

Unemployed: 290

Employed: 4,469

Total workforce: 4,759

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#53 (Tie)

Hudson

Unemployment rate, August 2013: 6.1%

Unemployed: 696

Employed: 10,740

Total workforce: 11,436

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#53 (Tie)

Milford

Unemployment rate, August 2013: 6.1%

Unemployed: 954

Employed: 14,670

Total workforce: 15,624

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#51 (Tie)

Oakham

Unemployment rate, August 2013: 6.3%

Unemployed: 65

Employed: 973

Total workforce: 1,038

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#51 (Tie)

Sutton

Unemployment rate, August 2013: 6.3%

Unemployed: 302

Employed: 4,500

Total workforce: 4,802

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#48 (Tie)

Holden

Unemployment rate, August 2013: 6.4%

Unemployed: 576

Employed: 8,430

Total workforce: 9,006

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#48 (Tie)

Paxton

Unemployment rate, August 2013: 6.4%

Unemployed: 158

Employed: 2,327

Total workforce: 2,485

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#48 (Tie)

Shirley

Unemployment rate, August 2013: 6.4%

Unemployed: 223

Employed: 3,269

Total workforce: 3,492

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#46 (Tie)

Ayer

Unemployment rate, August 2013: 6.5%

Unemployed: 283

Employed: 4,100

Total workforce: 4,383

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#46 (Tie)

Hardwick

Unemployment rate, August 2013: 6.5%

Unemployed: 94

Employed: 1,359

Total workforce: 1,453

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#45

Grafton

Unemployment rate, August 2013: 6.6%

Unemployed: 635

Employed: 9,043

Total workforce: 9,678

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#42 (Tie)

Hubbardston

Unemployment rate, August 2013: 6.7%

Unemployed: 163

Employed: 2,255

Total workforce: 2,418

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#42 (Tie)

Millbury

Unemployment rate, August 2013: 6.7%

Unemployed: 489

Employed: 6,787

Total workforce: 7,276

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#42 (Tie)

Petersham

Unemployment rate, August 2013: 6.7%

Unemployed: 43

Employed: 596

Total workforce: 639

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#40 (Tie)

Lancaster

Unemployment rate, August 2013: 6.8%

Unemployed: 240

Employed: 3,281

Total workforce: 3,521

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#40 (Tie)

Townsend

Unemployment rate, August 2013: 6.8%

Unemployed: 346

Employed: 4,738

Total workforce: 5,084

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#38 (Tie)

Charlton

Unemployment rate, August 2013: 7.0%

Unemployed: 491

Employed: 6,483

Total workforce: 6,974

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#38 (Tie)

Dudley

Unemployment rate, August 2013: 7.0%

Unemployed: 431

Employed: 5,696

Total workforce: 6,127

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#33 (Tie)

Auburn

Unemployment rate, August 2013: 7.1%

Unemployed: 613

Employed: 8,024

Total workforce: 8,637

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#33 (Tie)

East Brookfield

Unemployment rate, August 2013: 7.1%

Unemployed: 86

Employed: 1,129

Total workforce: 1,215

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#33 (Tie)

Holland

Unemployment rate, August 2013: 7.1%

Unemployed: 99

Employed: 1,291

Total workforce: 1,390

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#33 (Tie)

New Braintree

Unemployment rate, August 2013: 7.1%

Unemployed: 40

Employed: 524

Total workforce: 564

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#33 (Tie)

Rutland

Unemployment rate, August 2013: 7.1%

Unemployed: 313

Employed: 4,081

Total workforce: 4,394

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#32

Oxford

Unemployment rate, August 2013: 7.2%

Unemployed: 548

Employed: 7,032

Total workforce: 7,580

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#31

Uxbridge

Unemployment rate, August 2013: 7.3%

Unemployed: 536

Employed: 6,784

Total workforce: 7,320

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#30

Leicester

Unemployment rate, August 2013: 7.5%

Unemployed: 450

Employed: 5,565

Total workforce: 6,015

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#27 (Tie)

Ashburnham

Unemployment rate, August 2013: 7.6%

Unemployed: 236

Employed: 2,865

Total workforce: 3,101

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#27 (Tie)

Lunenburg

Unemployment rate, August 2013: 7.6%

Unemployed: 398

Employed: 4,850

Total workforce: 5,248

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#27 (Tie)

Northbridge

Unemployment rate, August 2013: 7.6%

Unemployed: 608

Employed: 7,383

Total workforce: 7,991

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#26

Spencer

Unemployment rate, August 2013: 7.7%

Unemployed: 492

Employed: 5,935

Total workforce: 6,427

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#24 (Tie)

Ware

Unemployment rate, August 2013: 7.9%

Unemployed: 394

Employed: 4,611

Total workforce: 5,005

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#24 (Tie)

West Boylston

Unemployment rate, August 2013: 7.9%

Unemployed: 259

Employed: 3,035

Total workforce: 3,294

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#21 (Tie)

Brimfield

Unemployment rate, August 2013: 8.0%

Unemployed: 152

Employed: 1,745

Total workforce: 1,897

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#21 (Tie)

Templeton

Unemployment rate, August 2013: 8.0%

Unemployed: 305

Employed: 3,520

Total workforce: 3,825

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#21 (Tie)

Westminster

Unemployment rate, August 2013: 8.0%

Unemployed: 297

Employed: 3,417

Total workforce: 3,714

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#19 (Tie)

North Brookfield

Unemployment rate, August 2013: 8.1%

Unemployed: 195

Employed: 2,224

Total workforce: 2,419

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#19 (Tie)

Palmer

Unemployment rate, August 2013: 8.1%

Unemployed: 508

Employed: 5,772

Total workforce: 6,280

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#18

Warren

Unemployment rate, August 2013: 8.4%

Unemployed: 209

Employed: 2,271

Total workforce: 2,480

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#17

West Brookfield

Unemployment rate, August 2013: 8.6%

Unemployed: 155

Employed: 1,652

Total workforce: 1,807

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#15 (Tie)

Royalston

Unemployment rate, August 2013: 8.7%

Unemployed: 52

Employed: 547

Total workforce: 599

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#15 (Tie)

Webster

Unemployment rate, August 2013: 8.7%

Unemployed: 723

Employed: 7,569

Total workforce: 8,292

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#13 (Tie)

Brookfield

Unemployment rate, August 2013: 8.8%

Unemployed: 163

Employed: 1,695

Total workforce: 1,858

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#13 (Tie)

Millville

Unemployment rate, August 2013: 8.8%

Unemployed: 158

Employed: 1,642

Total workforce: 1,800

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#11 (Tie)

Barre

Unemployment rate, August 2013: 8.9%

Unemployed: 244

Employed: 2,510

Total workforce: 2,754

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#11 (Tie)

Worcester

Unemployment rate, August 2013: 8.9%

Unemployed: 7,562

Employed: 77,653

Total workforce: 85,215

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#9 (Tie)

Ashby

Unemployment rate, August 2013: 9.0%

Unemployed: 149

Employed: 1,503

Total workforce: 1,652

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#9 (Tie)

Orange

Unemployment rate, August 2013: 9.0%

Unemployed: 332

Employed: 3,356

Total workforce: 3,688

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#7 (Tie)

Blackstone

Unemployment rate, August 2013: 9.2%

Unemployed: 488

Employed: 4,824

Total workforce: 5,312

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#7 (Tie)

Clinton

Unemployment rate, August 2013: 9.2%

Unemployed: 676

Employed: 6,652

Total workforce: 7,328

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#6

Winchendon

Unemployment rate, August 2013: 9.3%

Unemployed: 453

Employed: 4,407

Total workforce: 4,860

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#5

Leominster

Unemployment rate, August 2013: 9.6%

Unemployed: 1,937

Employed: 18,141

Total workforce: 20,078

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#3 (Tie)

Southbridge

Unemployment rate, August 2013: 9.9%

Unemployed: 787

Employed: 7,127

Total workforce: 7,914

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#3 (Tie)

Gardner

Unemployment rate, August 2013: 9.9%

Unemployed: 934

Employed: 8,514

Total workforce: 9,448

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#2

Fitchburg

Unemployment rate, August 2013: 10.0%

Unemployed: 1,829

Employed: 16,435

Total workforce: 7,914

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#1

Athol

Unemployment rate, August 2013: 10.5%

Unemployed: 543

Employed: 4,647

Total workforce: 5,190

 
 

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