In a time when budget crunches have increased the need for revenue among states, Massachusetts has offered their taxpayers the unique opportunity to assists the state by paying more in taxes. Although the state income tax rate in Massachusetts is officially 5.3%, the state provides the opportunity for residents and non-residents to pay income tax at an optional 5.85% rate.
It all began In November 2000 when 59% of Massachusetts voters approved a ballet initiative to reduce the personal income tax rate. As a result the new tax rate would decrease systematically over the next three calendar years beginning in 2001.
Following this vote, two interesting legislations occurred. First, Massachusetts repealed the third and final decrease to 5.0% and froze the personal income tax at 5.3%. Second, using the logic that millions of voters did not approve the original tax cut, Massachusetts legislators provided the opportunity for these individuals to pay at the higher 5.85% rate on their yearend income tax return as opposed to the lower 5.3% rate.
In the years since the proposal passed I have never selected the higher rate for one of my clients, nor have they offered voluntarily to pay at the higher rate. This may not be out of the norm, as on the average per year, between only one and two thousand individuals choose this option. With over 3 million tax returns filed annually in the state of Massachusetts, this is approximately one out of every 2,133 indivuals who file an income tax return in the state actually do choose the higher tax rate.
Therefore, it may be summarized that although taxpayers may not be opposed to paying a higher tax rate, as taxpayers in Massachusetts have proven, they will not do so voluntarily. For more information on how you can choose the higher rate when filing your return in the state of Massachusetts or other state income tax questions concerning professional athletes please feel free to contact me at alan@afpconsultingllc.com
ALAN POGROSZEWSKI is an Assistant Professor of Sports Studies at St. John Fisher College and the President of his own tax consulting business whose clientele include professional athletes performing services on three separate continents. Prior to accepting his position at St. John Fisher College, Mr. Pogroszewski was the Vice President of Business Operations for Sports Consulting Group, a firm that specializes in the representation of professional hockey players. Mr. Pogroszewski received his M.B.A. from Rochester Institute of Technology in 1996 and his M.S. in Taxation from St. John Fisher in 2003