How Massachusetts's Government Is Financed

Instructor: Matt Lamb

Matt has tutored for six years now, in a variety of subjects including reading, essay writing, chemistry, and theology. He is finishing his M.A. in Political Science this August.

In this lesson, you will learn about how Massachusetts's state government is financed. The three main sources we will discuss are taxes, fees, and federal funding.

Massachusetts Taxes

There are many taxes levied, or collected, by the state of Massachusetts, although the taxes levied are similar to other states.

First, Massachusetts has so-called sin taxes, which are taxes on products such as alcohol and tobacco. These products have been historically considered immoral or sinful. For example, Massachusetts has a tax on all alcohol bought in the state, as well as taxes on cigarettes, cigars, and other tobacco products. Many other states also have taxes on these products.

Second, Massachusetts taxes income at a rate generally of about 5%, on both earned income, meaning income from doing work, and income on capital gains, meaning income from investments.

So if you worked in a Massachusetts grocery store, for example, and earned $40,000, you would pay 5% on that amount, meaning you would pay about $2000 in taxes to Massachusetts (this is a simplified version, as there are exemptions and deductions that could lower your tax bill).

Massachusetts has a corporate tax rate, which is the taxes businesses pay on their profits. For example, the local restaurant or car repair shop pays taxes on the profits they make every year. Other taxes include a sales tax, a gas tax, and taxes on financial institutions.

Filling up at the pump? You pay a gas tax
Gas taxes

State Fees

Fees are similar to taxes, although the idea is that fees are generally user-specific. For example, while most people pay sales taxes, you only pay fees to the court system if you file a lawsuit. A court-ordered fine could also be considered a fee. For example, if you are found guilty of littering, you could be charged a fine.

Want to get a drivers license? There is a fee for that.

Fees often are applied when a citizen applies for a license of some sort. For example, the state charges a fee to citizens applying for teacher certification, as well as other occupational licenses. Fees can also be for permits, such as a permit to open a business or remodel a home. The state's transportation department charges fees for car registration and license plates as another example. Having covered fees, we can now wrap-up by discussing federal funds as a source of revenue.

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