A proposal to reduce Massachusetts' state income tax rate from 5 percent to 4 percent over three years would have created 43,000 new jobs, expanded the state economy by $14.5 billion, and saved the median household $1,095 annually, according to a new study published by Pioneer Institute. The tax cut would have also boosted total wages by nearly 2 percent and lowered the state unemployment rate by 0.3 percent. Voters were denied the chance to consider the ballot measure in November after the Supreme Judicial Court removed it following an error by the state Attorney General's Office.
The tax reduction could have also slowed the exodus of residents from Massachusetts, which lost 324,000 people—or 4.5 percent of its population—to out-migration between 2015 and 2024, the study notes. The present value of lost adjusted gross income totaled $28 billion over the decade, including $4.18 billion in 2023 alone. Only five states and Washington, D.C. experienced a larger percentage of population loss to net out-migration than Massachusetts during that period, and all except Alaska carry a high tax burden. In contrast, six of the seven states with the largest net in-migration over the decade were low-tax states, including competitor states North Carolina (up 6.5 percent) and Florida (up 5.8 percent). A 2023 Greater Boston Chamber of Commerce Foundation survey found that a quarter of young Bostonians expected to leave the area within five years, while just 38 percent said they were very likely to stay.
According to study author Jared Walczak, "Some individuals and businesses move directly because of taxes," but "many more move for jobs and opportunity. They move to where businesses are expanding and hiring. Increasingly, that's happening in lower-tax states." The study also finds that the income tax cut would have particularly helped small businesses, nearly all of which are "pass through" entities that report business income on the owner's personal tax return. These companies employ nearly 45 percent of workers in the Commonwealth, account for nearly $110 billion in payroll as of 2022, and generate over a third of gross revenue from employer businesses in Massachusetts. Pioneer Executive Director Jim Stergios said the ballot measure's removal amounts to "a celebration of the status quo—a Massachusetts in economic decline."
The report argues the tax cut is affordable because Massachusetts has seen sustained revenue growth in recent years. Inflation-adjusted tax revenue rose 62 percent from fiscal 2010 to fiscal 2025, far outpacing growth in median household income. Growth over just the last five years alone generated nearly double the cost of implementing the one percentage point reduction in the income tax rate. Part of the initial revenue loss would be offset by additional growth in personal, corporate, and sales tax revenue generated by the rate cut. Walczak estimates that revenue would return to pre-cut levels just over three years after the rate reduction is fully phased in, which would itself take three years. Future revenues would likely grow more quickly due to additional jobs, higher wages, and more economic growth following the tax reduction.
The study provides context that Massachusetts voters approved a reduction in the income tax rate from 5.85 percent to 5 percent over three years back in 2000, but the rate didn't actually fall to 5 percent until 2020 due to economic disruptions including the dot-com bubble, 9/11, and the Great Recession. Since that time, 26 states have reduced their individual income tax rates. Over the last decade, the median top state income tax rate has fallen from 5.75 percent to 4.7 percent. With the surtax on high earners approved in 2022, Massachusetts' top rate now stands at 9 percent—though the surtax would remain unaffected by the proposed tax cut. The analysis suggests the tax reduction would have given young people "a reason to build their futures in Massachusetts" by creating tens of thousands of new jobs and supporting the growth of local businesses.