2025 Public Policy and State Competitiveness Report
April 09, 2025
Executive Summary
Massachusetts is at a crossroads in maintaining its economic competitiveness. While the state has made progress with a $1 billion tax reform package in 2023, ongoing concerns about tax policy, business climate and workforce trends continue to drive high-income residents and businesses out of the Commonwealth. To address these challenges, MassCPAs conducted its third annual Public Policy and State Competitiveness Survey, providing critical data to inform policymakers and business leaders. Survey participants were in-state industry leaders as well as nearly 200 CPAs representing roughly 4,600 high- income clients (defined as clients with an annual taxable income in excess of $1 million).
Key Findings:
- Economic and Fiscal Landscape: Economic and Fiscal Landscape:
Massachusetts’ revenue picture remains uncertain despite stronger-than-expected surtax collections in FY24 and FY25. Future volatility, federal tax policy shifts and eco-nomic trends pose risks to fiscal stability. - High-Income Relocation Trends: 70% of CPAs surveyed had clients change their tax domicile in 2024, citing lower taxes (47%) and cost of living
(17%) as primary factors. - States such as Florida, New Hampshire, Texas and South Carolina are preferred destinations due to tax-friendly policies.
- Business Relocation and Growth Concerns: 27% of MassCPAs members’ business clients are reconsidering their presence in Massachusetts—up from 22% in 2023.
- The top barriers to growth include the state’s sting tax (30%), individual income tax rate (27%) and estate tax threshold (23%).
- Workforce Challenges and Talent Retention: 42% of businesses are focusing on talent retention strategies, including increased workplace flexibility, and 21% are turning to contractor and gig workers.
- Massachusetts’ efforts, such as the Internship Tax Credit, aim to strengthen the talent pipeline but must be expanded to counter ongoing workforce shortages.
- Competitiveness and Economic Outlook: 49% of surveyed professionals believe Masschusetts is becoming less competitive than other states.
- Only 6% see the state as significantly more competitive
Policy Recommendations:
To reverse these concerning trends and enhance Massachusetts’ business climate, MassCPAs proposes the following key reforms:
- Eliminate or Reform the Sting Tax: Modernize tax policy by removing an outdated excise tax on certain S-corporations, which disproportionately affects small businesses.
- Decouple from Section 163(j): Align Massachusetts with other states by allowing greater business interest expense deductions, promoting investment and growth.
- Raise the Estate Tax Threshold: Further increase the exemption beyond the 2023 reform to $5 million to prevent continued outmigration of wealth and investment, and to align Massachusetts with regional and national trends.
Conclusion
Massachusetts must act now to address outmigration, improve competitiveness and strengthen workforce development. Targeted tax reforms can help retain talent and investment. MassCPAs remains committed to working with the Healey-Driscoll Administration and the Legislature to advance policies that drive economic growth and long-term competitiveness. By taking bold action, policymakers can ensure Massachusetts remains a top destination for businesses and professionals.
