Rate will remain at 5.10 percent instead of dropping to 5.05.
No Income Tax Cut in 2017
Massachusetts did not meet the economic threshold in 2016 that would have triggered a tax cut in 2017.
In 2000, voters approved a ballot initiative that gradually reduced the state income tax rate from 5.95 percent at the time to 5 percent by 2003. Two years later, the Legislature passed a bill that froze the rate at 5.3 percent but allowed a 0.05 percent income tax reduction each year that certain economic thresholds are met, which are based on tax revenue growth. To trigger the tax cut, tax revenue has to have increased by 2.5 percent, adjusted for inflation.
In 2015, the state’s tax revenue met the thresholds for the fourth time, dropping the income tax rate to 5.10 percent from 5.15 percent. Between fiscal years 2015 and 2016, however, tax revenue grew less than 1 percent.
While this news isn’t any surprise, it is a frustration for Massachusetts small business owners, who have been waiting many years for the promised 5 percent income tax rate.