Massachusetts taxpayers can look forward to a little New Year’s gift: the state income tax rate will automatically drop to 5.2 percent from 5.25 percent on Jan. 1 because state revenues are coming in above projections.
The state Department of Revenue plans to release more information about the automatic tax cut later today, including how much the average taxpayer can expect to save. The tax cut will cost the state about $65 million in lost revenue in 2014.
The tax cut is being triggered by a 2002 state law that automatically cuts the income tax rate when revenues exceed benchmarks, essentially returning the state’s projected surplus to taxpayers. As of November, Massachusetts had collected $273 million more in tax revenue than initially projected.
Revenues were trending above expectations in 2012 and came close to triggering an automatic tax cut in 2013, only to fall slightly short at the end of the year.