The tax system in Massachusetts is more burdensome for low- and middle-income taxpayers than it is for the wealthy, according to the Tax Fairness Commission’s analysis of state tax laws.

The 15-member commission recommends that the state:
• Institute a graduated income tax by a Constitutional amendment
• Institute a package of reforms to increase personal tax exemptions, increase the state’s match to the Earned Income Tax Credit, expand the property tax circuit-breaker to all low-income individuals, and increase the flat income tax rate to offset the costs of the other changes, so long as 80 percent of taxpayers experience a tax cut or no significant increase
• Enact legislation allowing the Department of Revenue to make administrative changes and enable the state to collect online and remote sales taxes once the practice is authorized by Congress
• Explore ways to make the state more economically competitive, such as adopting new tax credits for research and development, reducing the corporate excise tax rate, and adopting a separate reduced small business tax rate
• Evaluate any proposal to increase or decrease revenue with an eye toward enhancing or at least not diminishing tax fairness in Massachusetts

The commission’s report, released March 1, calls for the Legislature and governor to work to determine the appropriate tax rates necessary to fund investment in public infrastructure, promote prosperity for all residents, ensure economic competitiveness, avoid destabilization of household budgets, encourage robust private sector investment in the state’s workforce, and achieve the greatest measure of fairness possible.

Federal legislation that would allow states to collect online and remote sales tax, called the Marketplace Fairness Act, passed the Senate last May but has not been taken up by the House. The act’s proponents, including the National League of Cities and the MMA, contend that it would level the playing field for brick-and-mortar retailers, who must collect sales taxes, which puts them at a competitive disadvantage with online sellers. The act would allow states to capture revenue that is currently off-limits, a growing concern as the online marketplace continues to grow.

The Tax Fairness Commission was established through the 2013 Act Relative to Transportation Finance and included members of the Legislature, representatives of fiscal policy organizations, and gubernatorial appointees with expertise in labor, economics or tax policy. No local officials were appointed to the panel. The commission met eight times over the course of six months.
 

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