A budget not only shows how much the state spends to support education, human services, transportation, health care and other programs but it is also includes the sources of revenue the state uses to pay for these programs. The revenue that the state budget relies on comes from a variety of sources including the income tax, the sales tax, the corporate income tax, other miscellaneous taxes and fees, and revenue provided by the federal government.
This page provides information about state tax revenues, and in some cases, local tax revenues as well (the figures in these charts, however, do not include revenues derived from fees or interest, or from the federal government). The following charts are provided below:
- A pie chart showing a breakdown of Massachusetts state tax collections for FY 2010.
- A bar chart showing the change in the amount of state-only tax revenue MA raised for each major tax, as a share of personal income from 1998 to 2008
- A bar chart showing the percent of total personal income paid in state taxes between 1988 and 2009.
- A bar chart showing how much people at different income levels in Massachusetts paid in state and local taxes in FY 2009.
- A bar chart showing how Massachusetts compares with the rest of the country in the amount of tax revenue collected as a share of personal income.
If you are interested in more information on state tax revenues you can get a copy of our
most recent Tax Primer or read a series of
fact sheets we have prepared on state tax revenues.
The state’s income tax is the largest source of state tax revenue, accounting for just over 54 percent of the total in FY 2010, followed by the sales, corporate, motor fuel and cigarettes taxes. Other taxes include taxes on estates, insurance and banking. Property taxes are not included in this chart, as those revenues are collected and used by local governments.
All of the major categories of state taxes saw substantial declines in revenue collections over the period from 1998 to 2008. This was in part due to changes in tax law that reduced rates and, to a lesser degree, due to changes in the economy and consumer spending patterns that led to declines in collections. While the Commonwealth increased the sales tax rate in 2009 leading to increased collections in this tax category, these recent sales tax revenue gains are greatly outweighed by the cumulative revenue losses shown in the chart above.
The percent of total personal income devoted to state taxes declined from1998 to 2008 (and declined further in 2009 while holding steady in 2010). The years 1998 and 2008 make for a good comparison as they represent roughly similar points in the business cycle. For more information about the role that spending and revenue decisions have played in the current fiscal crisis, please see the MassBudget brief, “Substantial Surpluses to Dangerous Deficits: A Look at State Fiscal Policies from 1998 to 2008.”
(Notes: These personal income figures make adjustments, recommended by researchers at the Federal Reserve Bank of Boston, to include an estimate of income derived from capital gains. The dollar figures in the chart above differ somewhat from those presented in the MassBudget Brief “Substantial Surpluses to Dangerous Deficits;” recent updates by the US Bureau of Economic Analysis to historical personal income data result in slightly higher dollar figures in the chart, above.)
State residents with the highest personal incomes devote the smallest share of that income to state and local taxes. Massachusetts residents may deduct their state income tax and local property taxes on their federal income tax. This federal tax deduction is particularly valuable to higher-income taxpayers who are in higher federal brackets. In 2009, Massachusetts filers with incomes in the top 1 percent of earners paid less than half as much of their income toward state and local taxes (5.0 percent after federal deduction) than did Massachusetts filers with incomes in the bottom 20 percent of earners (who paid 10.5 percent of their income in state and local taxes).
In 2008, state and local taxes in Massachusetts amounted to 10.3 percent of personal income, below the national average of 10.9 percent.