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Massachusetts taxpayers to begin paying lower state income tax rate in January: 5.15 percent

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BOSTON — Massachusetts taxpayers will start paying a lower state income tax rate beginning in January.

Revenue Commissioner Amy Pitter confirmed Wednesday that all the requirements needed to automatically lower the personal income tax rate from 5.2 percent to 5.15 percent beginning Jan. 1 have been met.

As a result, revenue collections for the remainder of the fiscal year, which ends June 30, will drop by about $70 million, contributing to an estimated $329 million budget gap.

State officials are looking for ways to close the gap even as Democratic Gov. Deval Patrick prepares to leave office, turning the keys over to incoming Republican Gov.-elect Charlie Baker.

Patrick last month ordered $198 million in immediate spending cuts to help close the gap.

Patrick exercised his authority to make the unilateral spending cuts in the executive branch of state government, although he spared certain areas, including the Department of Children and Families, aid to public school districts, pre-kindergarten education and public higher education.

The state's total budget is $36.5 billion.

Patrick has also proposed a $25.5 million reduction in unrestricted state aid for cities and towns, along with cuts of 1.5 percent for most state agencies that are not part of the executive branch and therefore cannot have their budgets reduced without legislative approval.

Democratic House Speaker Robert DeLeo has already ruled out any cut in local aid.

Baker has also signaled his opposition to the proposed local aid cut, saying it should be the last place lawmakers should look to balance the budget.

The House and Senate are not scheduled to resume formal sessions until January when Baker takes office.

Massachusetts voters approved a ballot question in 2000 to gradually lower the income tax rate from 5.95 percent to 5 percent. In 2002, the Legislature froze the rate at 5.3 percent, but also added a mechanism that would allow the rate to fall in increments of 0.05 percent if growth in annual revenues meets certain benchmarks.

The rate was reduced from 5.3 to 5.25 percent Jan. 1, 2012, and again last January when it fell to 5.2 percent.

Pitter reported Wednesday that preliminary revenue collections for November totaled nearly $1.6 billion, but continued to lag behind official estimates for the year. That's about $23 million or 1.5 percent more than the state took in last November, but $9 million below the estimate for the month.

Year-to-date tax collections are 2.7 percent more than this time last year, but still $43 million below estimates.

"November collections came in slightly above last year at this time but below what we anticipated largely due to below-benchmark performance in most categories," Pitter said.

Pitter said strong performance in withholding collections and better-than-expected individual estimated tax payments in November were offset by greater-than-expected individual refunds, lower-than-expected sales taxes, lower-than-expected corporate and business taxes and lower-than-expected income tax payments.

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