Massachusetts income tax rate to drop in 2019

The state's income tax rate will drop 0.05 percent in the coming year, the Department of Revenue announced Friday, thanks to continued strong revenue performance.

Department spokeswoman Julie Mehegan said the Part B individual income tax rate will drop from 5.10 to 5.05 percent. The department predicts that if the state's economic performance continues, the rate should drop to the target 5.0 percent in 2020.

"A strong economy and careful management of the Commonwealth's finances have created the conditions for Massachusetts taxpayers to get a much-deserved break," Gov. Charlie Baker said in a statement. "We are pleased that next year we will see taxpayers be able to keep more of their hard-earned money."

The last reduction came in 2016 when the rate dropped from 5.15 to 5.10 percent.

A tax cut schedule was created after voters approved an initiative to cut the state's income tax from 5.95 to 5 percent in three years. Under the provisions of Question 4 on the 2000 ballot, the state income tax rate would have been cut to 5.0 percent by 2003. The Legislature intervened in 2002 and passed a bill to spread the reductions out by tying the cuts to five separate revenue metrics. Legislators tried to ensure that the state would not lose significant revenues during difficult economic times.

Under the provisions of the new law, when revenue goals were met, the rate would drop by 0.05 percent for that tax year.

Beginning in 2012 the state rate dropped from 5.3 to 5.25 percent, while requirements were not met in 2013, keeping the rate stable. By 2014 continued improving economic performance triggering a cut that year, in 2015 and again in 2016.

While there was no cut in 2017, officials said Friday that the 2018 performance was satisfactory, triggering the announced rate cut.

The rate reduction will cost the state budget an estimated $84 million in 2019, and $175 million in 2020.

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