Massachusetts taxpayers received an income tax cut on New Year’s Day, when the commonwealth’s flat income tax rate dropped from 5.10% to 5.05% as part of a ballot measure approved by Bay State voters nearly two decades ago. If revenue targets are hit, the Massachusetts income tax rate will drop again in 2020, to 5.00%.
Yet right when Bay State taxpayers are getting some income tax relief at the state level, Democrats who took control of the U.S. House of Representatives last week are already moving to take federal income tax rates in the opposite direction – up.
Freshman Congresswoman Alexandria Ocasio-Cortex (D-N.Y.), who will appear on 60 Minutes this evening, is calling for the top federal income tax rate to be hiked as high as 70%. Should she have her druthers, the federal income tax hike that Ocasio-Cortez and her colleagues are calling for would more than claw back the relief that Massachusetts taxpayers just received last week, taking the federal and state combined income tax rate in Massachusetts up to a whopping 75.05%
Congressional Democrats like Alexandria Ocasio-Cortez, Speaker Nancy Pelosi (D-Calif.), and Rep. Joe Kennedy III (D-Mass.) paint their proposals for income tax hikes as a way to soak the rich, just as do those in the Massachusetts legislature who call for a move to a progressive state income tax system with higher rates. Yet raising income tax rates, be it at the federal or state level, would also reduce the job-creating capacity of thousands of small businesses that file under the individual income tax system.
In Massachusetts alone, more than 529,000 small businesses filed under the individual income tax system in 2016, the most recent year for which IRS data is available. That number only consists of sole proprietors. When factoring in partnerships and S-Corps, tens of thousands more Massachusetts small businesses would also be harmed by higher income tax rates
The state tax cut received by Massachusetts residents last week comes one year after they received federal tax relief from enactment of the Tax Cuts & Jobs Act. The last thing taxpayers need is to have Rep. Ocasio-Cortez, a former Massachusetts’ resident, and her colleagues undo this progress, which has helped the U.S. reclaim the spot as the world’s most competitive economy, according to the World Economic Forum.