The $5.1 Billion Question for Massachusetts Voters

This November, Massachusetts voters could decide to cut the state income tax from 5 to 4 percent, as part of a proposed ballot question.

If this proposal passes, the effects will be substantial and enduring, straining the state budget by shifting billions of dollars out of public coffers and into people's pockets.

We at the Center for State Policy Analysis are committed to helping voters understand the likely impact of this and all state ballot questions.

Using the latest available data, and the same dynamic modeling techniques from our 2022 analysis of the millionaires tax, this report shows how an income tax cut would affect state spending, the state economy, and households at different rungs of the income ladder.

We find that:

• A tax cut would give households around the state more money to spend and save, with the median household tax bill shrinking around $1,250 each year.
• Income tax collections would fall by nearly 20 percent and total state tax collections by roughly 10 percent, or $5.1 billion per year. A cut of this size would more than offset the revenue gains from the millionaires tax and imperil efforts to balance the state budget and sustain core government programs moving forward.
• Taxpayers across the income spectrum would see relatively similar benefits, with most households keeping an additional 1 percent of their income. This distribution looks quite different in dollar terms, with the highest-earning households receiving a tax cut roughly 30 times as large as the median household.
• The tax cut would be phased in over three years, beginning January 1, 2027. This creates a serious planning problem for lawmakers, who are already building next year's budget and cannot know whether revenues will suddenly drop.
• Because the tax cut is relatively small compared to household incomes, it is unlikely to have a significant impact on private spending or the overall state economy.