The enterprise tax local weather in Massachusetts has declined considerably over the previous yr, with the Commonwealth dropping to the fifth worst state within the nation for competitiveness, in accordance with a brand new report from a nationwide tax watchdog.
Massachusetts had the steepest fall from final yr within the nation, dropping 12 spots to forty sixth for total taxation within the 2023 State Business Tax Climate Index, a rating revealed by the Tax Foundation that compares state tax techniques.
“That means we are overtaxing our employers and our residents, both,” mentioned Jon Hurst, president of the Retailers Association of Massachusetts. “To be in the bottom five states, it’s not a good sign to either our tax-paying families or to employers, current or prospective. We’ve got to work on this.”
A driver behind the nosedive in tax competitiveness, the Tax Foundation discovered, is the state’s new Fair Share Amendment – or Millionaire’s Tax – which taxes incomes over $1 million an additional 4%.
“While the $1 million threshold at which the surtax kicks in is indexed to inflation, the surtax imposes a sizable marriage penalty that the Commonwealth lacked previously,” authors wrote within the report which got here out final week. “This policy change represents a stark contrast from the recent reforms to reduce rates while consolidating brackets in many other states.”
The crumbling tax system shouldn’t be a shock, mentioned Paul Craney, a spokesman for Massachusetts Fiscal Alliance, a staunch opponent of the Millionaire’s Tax. He referred to as out proponents who pledged that the surtax would strictly apply to people with an earnings of over $1 million.
“With a flip of a switch, the legislature lowered that threshold to $500,000 for married people and the Tax Foundation is predicting a clear negative outcome from this,” Craney mentioned in an announcement.
Hurst, whose group represents 4,000 companies within the state, advised the Herald on Friday that folks and companies alike are persevering with to go away Massachusetts attributable to taxation.
Massachusetts is the fourth worst state within the nation on the subject of out-migration, behind solely California, New York and Illinois, in accordance with knowledge gathered earlier this yr by Pioneer Institute, an financial coverage suppose tank.
The Millionaire’s Tax has exacerbated the years-long downside, and former Celtics participant Grant Williams used it as motivation to signal a four-year, $54-million contract with the Dallas Mavericks over the summer time. If he stayed in Boston, the surtax would’ve diminished that quantity to $48 million over the 4 years, he advised The Athletic.
The Tax Foundation additionally referred to as out a payroll tax that went into impact this yr in Massachusetts’ poor rating. The group additionally discovered that the state dropped 33 spots from the eleventh greatest state for particular person taxes to the sixth worst.
Two evident challenges going through small companies throughout the Bay State, Hurst mentioned, are its excessive unemployment and medical health insurance prices, each of that are the worst within the nation, in accordance with the Tax Foundation.
Hurst is looking on state lawmakers to create extra flexibility for small companies on medical health insurance as a substitute of imposing mandates and restrictions to allow them to be aggressive with “big, self-insured businesses.”
Gov. Maura Healey signed a $1 billion-a-year tax aid invoice earlier this month that Hurst believes will solely go to this point.
The bundle cuts the short-term capital beneficial properties tax from 12% to eight.5%, a business-backed transfer that has riled progressives who argue it provides a break to the rich. The compromise will value the state $561 million in fiscal yr 2023 and $1 billion a yr beginning in fiscal yr 2027.
It additionally contains boosts to the rental deduction cap, a tax credit score for a dependent youngster, disabled grownup, or senior, and the statewide cap for a housing manufacturing program. The invoice excludes estates valued as much as $2 million from the property tax by permitting for a uniform credit score of $99,600.
“It’s going to help,” Hurst mentioned, “but frankly, I think it’s a down payment on more action that has to come to make Massachusetts welcoming to investment, welcoming to entrepreneurs and to make sure that small businesses and consumers alike can be prosperous in the Commonwealth.”
Source: www.bostonherald.com”