FACT CHECK: Tax Foundation Ranks Massachusetts in Bottom 10 States for Tax Competitiveness

Last week, the Tax Foundation released its comprehensive 2025 State Tax Competitiveness Index. 

Researchers claim the Index captures “how well states structure their tax systems” to attract and retain taxpayers and businesses. Notably, the Tax Foundation analyzed existing tax rates and structures, while our Opportunity Report Card focuses on tax burden per capita. The verdict is the same. 

Ultimately, both indexes agree that Massachusetts lags behind most states when it comes to its heavy tax burden. 

Let’s look at the two indexes to see how they compare.

Overall

The Tax Foundation puts Massachusetts overall as the 9th worst* on the competitiveness scale, citing its “overly burdensome” tax structure, which includes the newly-enacted 4% surtax on income over $1 million. Researchers also note Massachusetts “is an outlier” because of its taxes on employer payrolls. The report finds that not only is Massachusetts placing excessive burden on individual income and property, but the corporate tax structure places higher burdens on businesses with large amounts of capital and discourages in-state investment.

The Tax Foundation generally claims that states ranked more “competitive” and “attractive” tax structures have fewer tax categories and less complicated, flat tax rates.

Our MOA Opportunity Report Card, which uses the latest available Census Bureau data from 2023, gives Massachusetts a “C-” in taxes. Measuring total tax burden per capita, the Commonwealth also ranks 9th worst* in the nation.

Also notable is the recent decline of Massachusetts' tax competitiveness: the Tax Foundation ranked the Commonwealth consistently at 17th or 16th worst* from 2020-2023, with a distinct drop down to 9th worst  in 2024 and again this year.

Corporate Tax

The Tax Foundation ranks Massachusetts as the 7th worst* for corporate taxes, blaming Massachusetts’ corporate excise tax. The corporate excise tax factors in a business’ capital stock, which means it could “impose undue burdens on businesses with large amounts of capital.” This could include businesses in machinery and equipment-heavy industries such as manufacturing and farming.

Similarly, the MOA Opportunity Report Card has Massachusetts ranked as the state with the 10th worst corporate tax burden, measuring $15,650 in corporate income tax collected per business establishment.

Individual Income Tax

The Tax Foundation ranked Massachusetts as the 9th worst* for individual income tax structure. This ranking has dropped in recent years since the passage and implementation of the new surtax on income over $1 million. Part of Massachusetts’ dismal score in this category is due to having one of the highest top marginal tax rates in the Northeast (second only to New York) and having one of the most progressive individual income tax structures in the Northeast (joining New York and Vermont).

Similarly, our Opportunity Report Card found that Massachusetts had one of the worst* individual income tax burdens per capita in America, only topped by Oregon and the District of Columbia. While the Tax Foundation found that nine states had worse income tax structure, the overall conclusion remains the same.

Sales Tax

Both the Opportunity Report Card and the Tax Foundation found that Massachusetts ranks in the middle of the pack on sales taxes. The Tax Foundation report puts the Commonwealth at 20th most competitive, but ranks neighboring states better, with New Hampshire as best in the country (with 0% sales tax) and Maine at 8th best Connecticut drops just below Mass. at #21 in the nation.*

Our Report Card puts it at 24th lowest per capita general sales tax burden, with New Hampshire also highest in the nation. Neighboring Rhode Island, Connecticut, and Maine fall slightly below Massachusetts’ sales tax burden per capita. 

Massachusetts does have key exemptions when it comes to sales, use, and excise tax. In Massachusetts, clothing, groceries, gasoline, e-books, and prescription medication are all exempt from sales tax. Services such as fitness, parking, dry cleaning, real estate services, financial services, streaming, landscaping, etc. are also tax exempt. Additionally, Massachusetts has an annual sales tax holiday. 

Property Tax

The two indexes agree that Massachusetts has some of the highest property taxes in the country. The Tax Foundation found the Bay State to have the 4th worst* property tax burden. According to the Tax Foundation, the burden is high as a result of the property tax base including business inventory, meaning that businesses may have to pay taxes on their real estate and certain types of inventory they own. Additionally, Massachusetts’ estate tax and real estate transfer tax cause the property tax burden to be high.

Our Opportunity Report Card also finds Massachusetts is among the highest property tax states in the country – with the 46th worst average property tax burden in the nation. Other Northeast states that fall in the bottom ten worst property tax states are New Jersey, Connecticut, New Hampshire, New York, Vermont, and Rhode Island.

Conclusion

The Tax Foundation’s in depth analysis and our Opportunity Report Card paint a similar picture. Massachusetts residents face substantial taxes. Yet another analysis of taxes by state by WalletHub further confirms this finding – its analysis based on property taxes, individual income taxes, and sales and excise taxes as a percentage of personal income reveals Massachusetts is the 20th worst tax state in the nation. However, it leaves out corporate income tax analysis, which significantly affects Massachusetts’ rankings in the Tax Foundation and Opportunity Report Card analyses.

Massachusetts’ high tax burden is a top concern already contributing to Massachusetts’ outmigration issue. In September, our poll showed that 82 percent of respondents thought their taxes were too high – with two-thirds saying high taxes were a top issue pushing people to leave the state.

On the other hand, three of Massachusetts’ top competitor states have significantly smaller tax burdens. Florida, New Hampshire, North Carolina all have competitive tax systems – confirmed by both the Tax Foundation and our Opportunity Report Card.

In the Tax Foundation report, Georgia, Nebraska, Indiana, Iowa, Mississippi, and Arkansas all improved their rankings by 2 or more places. To do so, these states took action and lowered individual income tax rates, lowered corporate tax rates, and/or consolidated tax brackets. Georgia even transitioned from a graduated income tax structure to a flat tax structure, contributing to a jump of 6 places.

If Massachusetts wants to stop the bleeding of outmigration and make the state more competitive for residents and businesses, lawmakers should assess how the Commonwealth’s high tax burden encourages people to move elsewhere.

*Language is standardized to compare the three analyses presented: The Tax Foundation ranks states 1-50 with 1 being the most competitive/best, we rank states as 1-50 with 1 being best, and WalletHub ranks states as 1-50 with 1 being the worst.