Mass. taxpayers to gain bit of relief starting Jan.1
Congratulations, taxpayers. The state of Massachusetts is handing out a tax break beginning Jan. 1, about enough for many couples to buy dinner at Applebee’s, provided they do not go wild with the appetizers.
The income tax reduction, from 5.3 percent to 5.25 percent, is the first in 10 years.
It comes more than a decade after voters approved a plan to cut the income tax to 5 percent within three years. But lawmakers soon stalled the measure when the economy grew grim.
Yesterday’s announcement, triggered by a set of positive economic indicators, is a sign that the state is recovering, albeit at a glacial pace.
“It’s .05 percent; I don’t want to oversell this,’’ said Robert Bliss, spokesman for the Department of Revenue.
Bliss said an average family of four people that owns a home and makes a combined $100,000 would see a reduction of $39 a year. A single parent with two children living in a rented home would get about $9 in relief.
Because the state’s income tax is flat, those who earn more and pay more in taxes will save more.
The tax rate was 5.95 percent in 2000, when voters agreed in a referendum to gradually reduce it to 5 percent by 2003. But the economy soured, and in 2002 lawmakers froze the tax at 5.3 percent.
The 2002 law set a series of conditions tied to tax collections, which would bring the rate down to 5 percent at a much slower pace. This year, tax revenue grew by 7.2 percent, setting in motion the tax cut.
Some Democrats lauded their good work yesterday in making the cut happen.
“It’s a good sign for our economy,’’ Senate President Therese Murray, a Democrat, said in a statement. “We put those benchmarks in place many years ago, and we’re keeping our commitment. . . . Now we need to make sure we keep this recovery going.’’
Keeping the commitment is a matter of interpretation. Republicans, who have pushed for a faster reduction in taxes, say the state has not fulfilled the mandate of the referendum.
“We should be at 5 percent; that’s what the voters approved,’’ said Representative Bradley H. Jones Jr., the Republican leader from North Reading. “It is kind of amazing that it’s taken nine years to get five hundredths of a point drop.’’
Even the relative good economic news is tempered.
Despite higher tax collections this year, the Department of Revenue predicted earlier this week that the rate of revenue growth would slow in the coming year, increasing between 2.7 percent and 3.2 percent. That may or may not be enough to allow another tax cut in 2013, which depends on a growth rate of 2.5 percent, adjusted for inflation.
State budget-writers have also said that such growth will not keep up with demands for social services, which are still rising quickly. The tax cut is worth about $114 million to taxpayers, meaning an equivalent loss in the state budget.
Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said the small reduction announced yesterday is a positive step toward meeting the 5 percent promise, but acknowledged there is a price to be paid.
“On the other hand, given the realities of 2013, this will likely mean additional budget cuts,’’ he said.
Social service advocates say the state should skip the tax cut, given that many of the neediest are expected to be hit hard in next year’s budget.
“We are concerned that this move could end up hurting the 1 in 10 individuals who receive vital human services from our state,’’ Michael Weekes, president and chief executive officer of the Providers’ Council, said in a statement. “But we must not mislead taxpayers that we have more than enough revenue in a sector where nearly 60 percent of organizations have had cumulative deficits on their state activities since 1993.’’
But Citizens for Limited Taxation, which campaigned for the 2000 ballot measure, said that however paltry, the relief is overdue.
“We’ll take it,’’ said Barbara Anderson, the group’s executive director. “Every little bit helps. At least they’re still showing some respect that the voters told them to go back to 5 percent in 3 years back in 2000.’’