A tax incentive is an aspect of Massachusetts tax code designed to incentivize or encourage a particular economic activity. Tax incentives can take many forms, including a deduction, exclusion, or exemption from a tax liability offered as an enticement to engage in a specified activity. They can be offered for a certain period of time or for a set amount.
Massachusetts has a wide array of both individual and corporate tax incentives. These incentives can have both positive and negative impacts on an economy. Among the positive benefits, if implemented and designed properly, tax incentives can attract investment (e.g., the MA investment tax credit), encourage certain behavior (e.g., the earned income tax credit), or provide generous benefits without providing commensurate benefits (e.g., MA film tax credit).
MTF examines tax incentives with respect to the amount of foregone tax revenue they represent, the economic benefits of the incentives, and how Massachusetts compares to other states with respect to the size, scope and necessity of them.
