New Data: Income Tax Cut Would Deliver Stronger Revenue Growth

Today, the Mass Opportunity Alliance (MOA) released an original revenue model that shows lowering the Massachusetts income tax rate would deliver long-term benefits to the state’s economic growth. 

The body of research used hundreds of historical budget and economic data points to forecast the impacts of cutting the state income tax from 5% to 4% — a popular MOA-inspired proposal that could appear on the ballot this fall. The rate reduction would be phased in over a three-year period. 

You can view top lines from the analysis here. You can view the full report complete with methodology here.

According to the new statistical model, Massachusetts revenues will start to grow in 2029, when the tax cut is fully in place. Revenues are also projected to grow nearly twice as fast as they averaged historically.

Key findings from the revenue model include:

• A short-term drop in revenue would be made up as the economy grows and people spend more of their own money. 

• The annual impact on revenue is expected to be modest: An estimated $680 million a year over the three years of implementation, after which revenue is expected to grow. Annually, that’s just one-tenth of what the state overspent on its budget in fiscal year 2025. 

• Considering the potential positive impacts on state GDP resulting from income tax rate reductions, short-term revenue losses drop to as low as $626 million a year across three years of implementation.
• MOA research inspired a ballot proposal to revise the state revenue cap to encourage fiscal responsibility and return more money to taxpayers. If this revision also passes, projections show the cap would not negatively impact revenues during the implementation of the tax cut.

“This new research suggests that sometimes taxpayers can have their cake and eat it too,” said Christopher R. Anderson, MOA co-organizer and president of the Massachusetts High Technology Council. “An income tax cut would put more money in people’s pocketbooks while also laying the foundation for stronger future revenue growth. Voters already say a tax cut would be good for their family’s finances — this data shows it would be good for state coffers, too.”