Back in January, Massachusetts Gov. Deval Patrick (D) proposed a significant change to the state's tax system. He proposed raising the state's one-rate income tax from 5.25 percent to 6.25 percent while doubling the personal exemption and ending other carveouts, cutting the sales tax from 6.25 percent to 4.5 percent, along with higher cigarette and gasoline taxes.
The income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increased ended up going nowhere, along with the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. reduction. (The Massachusetts Budget & Policy Center details what made it into the state budget, approved by the Legislature and now on the Governor's desk.) The $1-per-pack cigarette and 3-cent-per-gallon gasoline tax increases are in there, with the latter especially contentious: the Legislature relies on Massachusetts Turnpike tolls after their scheduled 2017 expiration, while the Governor wants a higher gas tax.
The budget also extends the sales tax to purchases of custom software, raises sales tax revenue through an agreement with Amazon.com, and pockets some revenue by delaying yet again the implement of FAS 109 tax deduction for corporations.
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