Mass. income tax rate cut by .05 percent

Mass. certifies automatic income tax cut from 5.3 to 5.25 percent, starting Jan. 1

Associated Press

BOSTON (AP) -- Massachusetts revenue officials said Thursday that tax collections had grown sufficiently in recent months to trigger an automatic cut in the state income tax, albeit a small one.

The cut, from 5.3 percent to 5.25 percent, will go into effect on Jan. 1. The savings to the average taxpayer would be minimal — most would pocket less than $50 a year under the change — but the impact on the state budget could be significant.

Revenue Commissioner Amy Pitter has estimated that the .05 percent reduction in the rate will cost the state about $54 million during the remainder of the current fiscal year, and about $114 million in the fiscal year that starts on July 1, 2012.

Pitter, as had been expected, certified the tax cut on Thursday in a letter to Secretary of Administration and Finance Jay Gonzalez, explaining that state tax revenues had reached a series of thresholds required to trigger the reduction in the rate.

Massachusetts voters approved a ballot question in 2000 to gradually lower the income tax rate from 5.95 percent to 5 percent. In 2002, the Legislature froze the rate at 5.3 percent, but also added a mechanism that would allow the rate to fall in increments of .05 percent if growth in annual revenues meets certain benchmarks.

The cut on Jan. 1 would be the first since the 2002 law.

Pitter said inflation-adjusted revenues grew 7.2 percent in fiscal 2011 compared to the previous year, easily meeting the threshold of 2.5 percent under the law. Additional thresholds were met over the next several months, resulting in Thursday's certification of the tax cut.

State officials and outside budget experts warned that the tax cut does not signal the end of tight fiscal times for Massachusetts, pointing out that the state still took in less revenue last year than it did in fiscal 2008, prior to the recession.

Michael Weekes, president and CEO of the Provider's Council, a group representing human services agencies in Massachusetts, said he was concerned the tax cut could lead to less funding for social programs.

"We understand state residents need tax relief — many of those who are struggling with low wages are direct care workers in the human services system," Weekes said. "But we must ensure that cutting the state's tax rate does not hurt our most vulnerable who receive essential supports from this chronically underfunded sector."

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