Analysis of Share of Income Paid in Taxes for Households at Different Income Levels
In Massachusetts, as in most states, high-income households pay a smaller share of their income in taxes than lower and middle income households (see Table 1 and Figure 10).12 This is primarily because such households pay a much smaller share of their income in sales taxes than do lower income people, as can be seen in Table 1 which presents data from the Institute on Taxation and Economic Policy showing how taxes in Massachusetts are distributed among income groups. The part of the population with lowest income 20 percent, or quintile, of Massachusetts taxpayers pay 9.1 percent of their income in state and local taxes — most of it in sales, excise, and property taxes. The percent of income paid in these taxes tends to drop off as income increases; by the fourth quintile sales and excise taxes make up less than half as much of personal income of taxpayers, and property tax makes up somewhat less also. The income tax taxes an increasing share of personal income in the higher quintiles. This is somewhat offset, however, by the deductibility of income taxes on federal income tax returns — since persons with higher incomes are in higher tax brackets at the federal level the fact that state income taxes can be deducted from federal income taxes is particularly beneficial to higher income taxpayers.
In the very high-income groups, sales and excise tax collections continue to fall off, making the overall tax system somewhat regressive.13
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