Massachusetts

The state levies a 12% tax on interest, dividends, and short-term capital gains, a 5% tax rate on capital gains from assets held between one and two years, a 2% rate on capital gains from assets held longer than that, and, in 2003, a flat 5.3% rate in on all other taxable personal income. The personal income tax rate has been reduced in steps from 5.95% in 1999. The corporate income tax rate is 9.5% with the franchise tax (at 0.26% per $1000 income) built into the tax rate. Commercial banks and other banking and trust companies pay a 10.5% tax on net income; savings and loans, 10.91%. There is a corporate minimum tax of $456 on public utilities, 6.5%.

The gross receipts tax on sales is 5%, but such necessities as food, clothing, and home heating fuel are exempt. Other levies include a room occupancy tax of 5.7%, with a local option of up to 4%, a cigarette tax, a gasoline tax, a deeds tax, and a motor vehicle excise tax. There is also a wide array of state and local selective (excise) taxes, including a room occupancy tax of 5.7%, with a local option of up to 4%, a motor vehicle excise tax, taxes covering motor fuels, tobacco products, insurance premiums, alcoholic beverages, amusements, pari-mutuels, and other selected items. In 2002 the gas tax was raised from 21 cents to 21.5 cents and the cigarette tax increased from 76 cents a pack to $1.51 a pack. In 1997, the estate tax changed from a separate system of estate taxation, in which estates were taxed from 5% to 16%, to a "sponge tax" system, whereby the amount of estate tax due was equal to the amount of the maximum federal credit for state death taxes. With the scheduled phase-out of the federal death tax credit by 2007, Massachusetts has reinstated its independent estate tax imposed only on estates worth $675,000 or more. Death and gift taxes accounted for 1.3% of state tax collected in 2002. Other state taxes include various license fees, a deeds tax, and a small property tax. Most property taxes are collected at the local level, although the tax system is relatively centralized, with the state collecting 67.9% of all state and local taxes in 2002.

The state collected $17.225 billion in taxes in 2002, of which 53.4% came from individual income taxes, 24.9% from the general sales tax, 10.2% from selective sales taxes, 5.2% from corporate income taxes (including built-in franchise fees) and 3.4% from license fees. In 2003, Massachusetts ranked 13th among the states in terms of state and local tax burden, which amounted to about 9.9% of income.

The following table from the US Census Bureau provides a summary of taxes collected by the state in 2002.