Our State Budget: Building a Better Future Together

Massachusetts Budget and Policy Center15 Court Square, Suite 700, Boston, MA 02108

617.426.1228www.massbudget.org

Education

Transportation

Libraries, Parks and Recreation

Public Safety

Clean Air and Safe Drinking Water

Prisons and the Courts

Health Care and Public Health

Human Services

Total Personal Income in

Massachusetts

What Percent of our Income Funds these Programs?

Taxes as Percent of Personal Income, 2011

State and Local Taxes

10.4%

Mass. Taxes are About Average, 2011

AK

ND NY WY VT M

E NJ WI

WV

CA

MN HI

RI CT

DE IL OH

U.S. PA IA

NM MA NE NV KS

AR

M

I IN

MD KY

O

R NC CO

MS UT MT

WA

AZ

LA

ID

GA

SC NH TX VA MO

FL

O

KAL

TN SD

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

State and local taxes as % of state personal income

US 10.6% MA 10.4%

Why We are Called “Taxachusetts”AK NY M

A VT CA WY

MN AZ WI

MT HI NE NJ RI DC ND US CO MI

MD

ME

OR SD WA IA CT LA DE PA WV

NMIL UT KS NV MS KY GA ID NC VA SC OK TN IN NH TX MO FL AR OH AL

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%State and local taxes as % of state personal income

US 11.4%

MA 13.8%

Fiscal Year 1977

MA Taxes Among Largest Declines: 1977- 2011

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Percent change in state and local taxes as % of state personal incomeNote: North Dakota (35.5%) and Alaska (21.6%) exceed the scale of this graph.

US 7.3% Decrease

MA 25.0%Decrease

Tax Cuts Have Affected Services

Chapter 70 Education Aid

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

Billions, Inflation Adjusted

Includes ARRA funding; Adjusted using the inflation factor identified in Chapter 70

4.4% decrease since FY01

Local Aid

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.844% decrease since FY01

Billions, Inflation Adjusted

Early Education and Care

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0

$100

$200

$300

$400

$500

$600

$700

$80029% decrease since

FY01

Millions, Inflation Adjusted

Higher Education

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.625% decrease since

FY01

Billions, Inflation Adjusted

Public Health

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0

$100

$200

$300

$400

$500

$600

$700

$80022% decrease since

FY01

Millions, Inflation Adjusted

Human Services

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5 Essentially level since FY01Billions, Inflation Adjusted

Mental Health

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0

$100

$200

$300

$400

$500

$600

$700

$800

Millions, Inflation Adjusted 12% decrease since FY01 Some costs shifted

Environment and Recreation

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14$0

$50

$100

$150

$200

$250

$300

$350

Millions, Inflation Adjusted

35% decrease since FY01

A Tax System Should Be . . .

Adequate

Stable

Simple/Efficient

Fair

The Sales Tax is Regressive

Less than $21,000

$21-$43,000 $43-$69,000 $69-$114,000 $114-$246,000 $246-$708,000 $708,000 or more

0%

1%

2%

% personal income paid in sales tax, 2012

Source: Institute for Taxation and Economic Policy.

IncomeRange:

Lowest 20%

Second 20%

Middle 20%

Fourth 20%

Next 15%

Next 4%

Top 1%

Top 20%

Why the Sales Tax is Regressive

Lowest 20% Second 20% Third 20% Fourth 20% Highest 20%$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

Average income before taxes

Average annual spending

Average Income & Average Spending, U.S. 2008

Income Group:

Source: Bureau of Labor Statistics, Consumer Expenditures Survey, 2008

Lowest 20%

Second 20%

Middle 20%

Fourth 20%

Top20%

The Property Tax is Regressive

Less than $21,000

$21-$43,000 $43-$69,000 $69-$114,000 $114-$246,000 $246-$708,000 $708,000 or more

0%

2%

4%

6%

% personal income paid in property tax, 2012

Source: Institute for Taxation and Economic Policy.

IncomeRange:

Lowest 20%

Second 20%

Middle 20%

Fourth 20%

Next 15%

Next 4%

Top 1%

Top 20%

The Income Tax is Progressive

Less than $21,000

$21-$43,000 $43-$69,000 $69-$114,000 $114-$246,000 $246-$708,000 $708,000 or more

0%

1%

2%

3%

4%

5%

% personal income paid in income tax, 2012

Source: Institute for Taxation and Economic Policy.

IncomeRange:

Lowest 20%

Second 20%

Middle 20%

Fourth 20%

Next 15%

Next 4%

Top 1%

Top 20%

State and Local Taxes are Regressive

Less than $21,000

$21-$43,000 $43-$69,000 $69-$114,000 $114-$246,000 $246-$708,000 $708,000 or more

0%

2%

4%

6%

8%

10%

% personal income paid in state and local taxes, 2012

Source: Institute for Taxation and Economic Policy.

IncomeRange:

Lowest 20%

Second 20%

Middle 20%

Fourth 20%

Next 15%

Next 4%

Top 1%

Top 20%

Investing in a strong state economy

8% 9% 10% 11% 12% 13% 14% 15% $13

$14

$15

$16

$17

$18

$19

$20

$21

$15

$14

$15

$17

$18

$20

$17

$16 $16

$17

$16

$15

$17

$15

$16

$15 $15

$19 $19

$16 $16

$18

$16

$15 $14

$15 $15

$18

$20

$15 $15

$17

$16 $15

$17 $17

$17

$15 $15

$15

$16

$18

$16

$18

$16

$15

$17

State & Local Taxes as a Share of State Personal Income

Med

ian

Hou

rly

Wag

e

No Clear Relationship Between Tax Levels & Wages, 2012

20% 25% 30% 35% 40% 45% $13

$14

$15

$16

$17

$18

$19

$20

$21

$15

$19

$15

$14

$17

$18

$20

$17

$16 $16

$17

$15

$17

$15 $16 $16

$15 $15

$16

$19

$19

$16

$18

$15

$16

$14

$15 $15

$18

$20

$15

$17

$15

$16

$16 $15

$17 $17

$17

$15 $15

$15

$15

$16

$16

$18 $18

$15

$16

$17

Percent of Workforce with Bachelor's De-gree

Med

ian

Hou

rly

Wag

e

Strong Relationship Between Education and Wages, 2012

Individual Wages Increase with Level of Education

High school Some college Bachelor's or higher$0

$5

$10

$15

$20

$25

$30

$14.81$15.86

$27.16

Median hourly wage in Massachusetts by educational level, 2010

8% 10% 12% 14% 16% 18% 20% 22% 24%$12

$14

$16

$18

$20

$22

$24

$26

$28

$15

$26

$16

$13

$19$18

$17$17

$14$15

$17$16

$19

$17 $16 $16$16$16

$14

$18

$16

$19

$17

$13

$16 $17

$15

$17

$15

$18

$16

$17

$14

$15

$18

$16

$19

$17

$16

$13$13

$15

$16

$17

$14

$16

$20

$18 $17

$19

Percent of Workforce with Bachelor's Degree

Med

ian

Hou

rly

Wag

e(in

flatio

n ad

just

ed, 2

012

$)

Weak Relationship Between Education and Wages 30 Years Ago, 1979

Tools to Learn More

Massachusetts Budget and Policy Center: www.massbudget.org

MassBudget Online Budget Browser:http://browser.massbudget.org

Commonwealth of Massachusetts Budget: www.mass.gov/budget

browser.massbudget.org

MassBudget’s

Children’sBudget

children.massbudget.org