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SENATOR SPILKA ANNOUNCES GREAT ADVANCES TO REDUCE COSTS, HELP RESIDENTS SAVE, AND PROPEL ECONOMIC DEVELOPMENT

January 19, 2012

(Boston) – Continuing a commitment to provide economic relief for businesses across the Commonwealth, Senator Karen Spilka (D-Ashland) announced Senate passage of a bill that freezes the unemployment insurance premiums paid by businesses. Without the freeze, the rate would increase by approximately $220 per employee, with the average business seeing payments jump from $715 to $935 for each worker.

“By freezing the unemployment insurance rate, we are taking additional steps to help businesses expand and hire additional employees,” said Spilka. “As our economy continues to recover, it is important that we remain dedicated to providing relief to local businesses and foster an environment where they can grow and spur economic vitality throughout the Commonwealth.”

UNEMPLOYMENT RATE DROPS

Also making headlines today was the announcement by the Executive Office of Labor and Workforce Development that the total unemployment rate was 6.8 percent, down from the November rate of 7 percent.

This is the lowest monthly unemployment rate the state has seen since December 2008 and is well below the national unemployment average, which was reported at 8.5 percent in December. In 2011 alone, the state added nearly 41,000 jobs.

PERSONAL INCOME TAX RATE DROPS

On January 1, 2012, in a move to provide additional relief to individual residents, the personal income tax rate  dropped from 5.3 percent to 5.25.  This is the first decrease in ten years.

In 2000, Massachusetts voters approved a ballot initiative to gradually lower the state income tax from 5.95 percent to 5 percent. Two years later, as the state was facing an economic recession, the Legislature froze the rate at 5.3 percent.  At the same time the Legislature established benchmarks to measure economic growth with the promise that when revenue grew fast enough to reach those targets the income tax rate would be cut.

Massachusetts is in the beginning of a recovery and state revenue increased enough in 2011 to trigger the tax cut.  This reduction is expected to save taxpayers between $111 million and $117 million annually.

CORPORATE TAX RATE CUT

Also on the first of the year, the corporate income tax rate dropped to 8 percent from 8.25 percent.  This was the next step in the important corporate tax reform passed by the Legislature in 2008. That reform legislation called for a gradual reduction to the corporate tax rate, which was at 9.5 percent when it was signed into law. The corporate income tax has dropped in three stages: from 9.5 percent to 8.75 percent on January 1, 2010, to 8.5 percent on January 1, 2011, and finally to 8 percent on January 1, 2012 as the final stage in the process.  This gradual reduction to the corporate income tax creates a fairer corporate tax system, helps Massachusetts maintain its competitive edge, and provides relief for Massachusetts-based companies.

Massachusetts now has the lowest corporate income tax rate in New England.

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