Massachusetts Pays the 9th Most Federal Tax in the United States… See Where It Comes From

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Written by Katie Melynn Wood

Published: February 14, 2024

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Even though the state only covers around 10,500 square miles, Massachusetts is one of the most influential states in American history. For a smaller state, Massachusetts pays a big portion of federal tax. Here’s a breakdown of where all that tax revenue comes from in the Bay State.

The largest portion of taxes comes from individual income tax and FICA tax. FICA stands for Federal Insurance Contributions Act. This is a payroll tax at the federal level and funds programs like Social Security and Medicare. The FICA tax is paid by the individual earning income and by the employer. The state withholds a percentage to cover this tax. When you file your tax return each year, the state compares your income records to the withholdings. The state returns any extra to you as a tax refund. If there is not enough withheld, you pay a tax bill. The total percentage of your income that is taken out for the FICA tax is 15.3%. This is split half and half between the employee and the employer.

The individual income tax payments and SECA tax make up another large portion of taxes in Massachusetts. SECA stands for Self-Employed Contributions Act. It is very similar to the FICA tax but applies to self-employed individuals. In this case, the self-employed person pays both the employee and the employer portion of the tax. However, the employer-paid portion is deductible as a business expense. When paying taxes, it is important to understand which taxes you are required to pay. A tax professional can help you figure out which forms to submit as well as where to list various kinds of income on those forms. They also know a lot about exceptions or deductions that might apply.

Do All People Pay the Same Taxes?

No, the required taxes can vary based on a person’s job, as well as other factors like marital status and if they have dependents. Some taxes are required on earned income, such as FICA or SECA taxes. Others, such as estate or gift taxes, apply when a person inherits money, property, or other items. Individuals pay these when an event occurs rather than on a recurring basis. Income tax is typically the most common tax that people are familiar with paying.

Just like individuals have to pay taxes, so do businesses. This is listed as business income tax and makes up a large portion of the overall tax structure in Massachusetts. There are various types that fall under this umbrella. The exact taxes that a business pays will depend on the way the business is set up. Some businesses also have to pay excise tax. This usually applies to retailers, manufacturers, or importers of certain goods. Gasoline, alcohol, cigarettes, and gambling are some of the more common examples of goods subject to excise tax.

Does Massachusetts Have High Taxes?

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Taxes on goods like gasoline impact the price that you pay at the pump.

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Compared to other states, Massachusetts pays taxes that are mid-range. The state sales tax rate is 6.25%. Massachusetts does not charge local sales tax. California has a state sales tax as high as 7.25% and Tennessee has a combined state and local tax rate of over 9%. Delaware, Oregon, Montana, and New Hampshire, on the other hand, do not have state or local sales taxes at all. Individual state income tax rates are 5% on earned income over $8,000 in Massachusetts. Some capital gains income (such as from the sale of a home or investments) are slightly higher at 8.5%. Massachusetts requires those who earn income in the state to file a state income tax form each year by April 15th. There are some exceptions. However, those must be documented as well.

Generally, anyone who lives in Massachusetts either full-time or part-time must file a state tax return and pay taxes on their income. Members of the military and their families are one group that is exempt from this in some cases. Businesses registered in or doing business in the state must also file and pay taxes. Of course, tax codes and laws change each year. The best thing for individuals and businesses to do is to stay informed using resources and guides provided by the state of Massachusetts. Professional tax preparers and experts are also often knowledgeable and experienced. For a fee, they prepare your taxes, track your income, and complete and submit all required forms.

Individual income tax withheld and FICA tax$110,881,353
Individual income tax payments and SECA tax$38,702,189
Unemployment insurance tax$187,031
Railroad retirement tax$75,406
Estate and trust income tax$2,365,048
Estate tax$574,432
Gift tax$137,514
Excise taxes$1,094,864
Business income taxes$15,832,589

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About the Author

Katie is a freelance writer and teaching artist specializing in home, lifestyle, and family topics. Her work has appeared in At Ease Magazine, PEOPLE, and The Spruce, among others. When she is not writing, Katie teaches creative writing with the Apex Arts Magnet Program in Anne Arundel County, Maryland. You can follow Katie @katiemelynnwriter.

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