SMALL BUSINESS SUPPORTS A 5% STATE INCOME TAX IN BUDGET
BOSTON (July 8, 2015): The Massachusetts chapter of the National Federation of Independent Business (NFIB) is pleased that the legislature has retained the current formula to allow the income tax rate to finally return to 5% in the FY2016 state budget.
“The personal income tax is a business tax for small businesses. Because most small businesses are ‘pass through’ entities, small business owners pay their taxes just as their employees do, as individual income taxpayers. With state revenues growing, there is no economic justification for changing the formula that will lower the tax rate,” Bill Vernon, NFIB Massachusetts state director said. “In addition, keeping the promise to return the tax rate to 5 percent as soon as possible will help improve voters’ confidence in government doing the right thing.”
The Senate recently passed as part of their version of the FY 16 state budget a change in tax law. The proposal included freezing the Massachusetts income tax rate at 5.15 percent. But the conference committee rejected that idea and instead included much needed tax relief for poor working families and ‘paid for’ it by repealing a corporate tax break that had not been implemented. In the absence of legislative action, the state income tax rate will eventually fall back to five percent, according to a formula tied to state revenue increases. State political leaders promised the increase in the income tax rate in 1989 was “temporary”, but the rate has never returned to 5%.
“The state’s constitutionally mandated flat income tax, as opposed to a graduated income tax with steep rate increases as incomes climb, is also an economic development law that is at least partially responsible for Massachusetts’ relative economic strength through the years,” Vernon continued. “Imposing a more graduated income tax, whether by rate increases or by increasing personal exemptions, would harm economic growth and job creation in small businesses. The flat 5 percent tax is Massachusetts’ most important pro-economic growth policy.”
