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MassBudget Brief: Property Taxes - Helping Those Who Need It Most
Table of Contents
- Putting Property Tax in Context: Trends in Income, Sales and Property Taxes
previous
Table of Contents
- Putting Property Tax in Context: Trends in Income, Sales and Property Taxes
Looking at the Commonwealth’s tax revenues as a share of the economy allows us to determine whether these revenues have grown faster than the rate of growth in the economy as a whole, or whether they have not kept pace. Over the past decade, the personal income tax as a share of our economy has declined significantly, from 3.6 percent of the economy to 3.1 percent (see Figure 1).
Figure 1
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The personal income tax declined largely due to a number of tax cuts enacted during that period. Sales tax revenues during this same period declined modestly, from 1.5 percent of personal income to 1.4 percent, largely because of increasing tax-free Internet purchases and a shift to greater purchasing of non-taxed services. The property tax declined from 1995 to 2000, but then began to increase as large income tax cuts and the declining economy led to cuts in state aid to cities and towns. As a result, the property tax has played an increasing role in providing the revenue to fund essential public functions like education and public safety over the past five years.
Over the past decade, two tax cuts in particular have significantly reduced income taxes for higher income people: an income tax rate cut and a tax rate cut on dividends and interest. The tax rate for most income was reduced from 5.95 percent to 5.3 percent during this period, reducing state revenue by $1.26 billion in 2008. The tax rate on interest and dividend income was also reduced from 12 percent to 5.3 percent, costing the state $638 million in 2008. Figures 2 and 3 show that higher income taxpayers received particularly large tax reductions as a result of these tax cuts.
Figure 2
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Figure 3
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Figure 1
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The personal income tax declined largely due to a number of tax cuts enacted during that period. Sales tax revenues during this same period declined modestly, from 1.5 percent of personal income to 1.4 percent, largely because of increasing tax-free Internet purchases and a shift to greater purchasing of non-taxed services. The property tax declined from 1995 to 2000, but then began to increase as large income tax cuts and the declining economy led to cuts in state aid to cities and towns. As a result, the property tax has played an increasing role in providing the revenue to fund essential public functions like education and public safety over the past five years.
Over the past decade, two tax cuts in particular have significantly reduced income taxes for higher income people: an income tax rate cut and a tax rate cut on dividends and interest. The tax rate for most income was reduced from 5.95 percent to 5.3 percent during this period, reducing state revenue by $1.26 billion in 2008. The tax rate on interest and dividend income was also reduced from 12 percent to 5.3 percent, costing the state $638 million in 2008. Figures 2 and 3 show that higher income taxpayers received particularly large tax reductions as a result of these tax cuts.
Figure 2
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Figure 3
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Table of Contents
- Putting Property Tax in Context: Trends in Income, Sales and Property Taxes
