Analysis compares decade-long changes in tax rates, private sector employment, and revenue growth in two competing state economies
Boston, MA — As Massachusetts voters consider a ballot initiative to reduce the personal income tax rate by one percentage point over three years beginning in 2027, a new analysis finds the Commonwealth’s employment has stagnated since 2020—while competitor North Carolina has used a sequence of incremental income and business tax cuts to add 450,000 jobs and accelerate business formation and population growth during that same period.
The report, North Carolina and Massachusetts: Two Different Paths on Growth, Taxes, and Jobs, compares tax policy changes and economic outcomes from 2013 to 2025 in states that compete directly in life sciences, technology, financial services, advanced manufacturing, and other research-driven industries.
“Massachusetts is twiddling its thumbs, watching talent walk out the door, while other states are outcompeting us for workers and investment,” said Jim Stergios, Executive Director of Pioneer Institute. “Massachusetts’ trend lines are troubling: fewer people, less wealth, weaker business creation, and rising unemployment. This study shows how a direct competitor moved in the opposite direction—and won.”
From 2020 to 2025, private sector employment in Massachusetts declined by approximately 18,000 jobs (−0.55 percent), while North Carolina added 448,900 jobs (+11.52 percent). Had Massachusetts matched North Carolina’s rate of job growth, the Bay State would today have 3.65 million private sector jobs—377,000 more than is the case—and $1.9 to $2.3 billion in additional revenue via income, sales and other taxes.
The divergence is even more evident in the major urban areas of both states. Private sector employment in the Boston–Cambridge–Newton metropolitan area was effectively unchanged over this period. By contrast, North Carolina’s Research Triangle and Charlotte regions expanded employment by more than 15 percent, adding over 290,000 jobs across similarly situated research and business sectors.
The report identifies a series of specific policy changes implemented in North Carolina between 2014 and 2025. The state reduced its individual income tax rate from 5.8 percent to 4.5 percent, with current law providing a path to 3.99 percent for FY27. It reduced its corporate income tax rate from 6.0 percent to 2.3 percent and scheduled its elimination for 2030. It increased its standard deduction and paired these changes with future revenue-triggered income tax rate reductions and a broader structural simplification of the tax code.
Massachusetts made more limited adjustments over the same period. State revenue levels triggered a mandate to reduce the state’s flat income tax rate from 5.3 percent to 5.0 percent. The state imposed a 4 percent surtax on income above $1 million beginning in 2023, maintained an 8 percent corporate excise rate, and made marginal adjustments to the state’s short term capital gains tax rate and its estate tax threshold.
From 2014 to 2024, both states experienced growth in tax revenues, but under different conditions. North Carolina’s real total tax revenue increased by 22 percent over the period despite reductions in tax rates. Massachusetts’ real total tax revenue increased by 34 percent, reflecting, in part, higher effective tax burdens, including the addition of a surtax.
Consumption-based tax collections reflect differences in underlying economic activity. North Carolina’s real general sales tax revenues increased by 61.4 percent between 2014 and 2024, compared to 34.6 percent in Massachusetts.
“Massachusetts and North Carolina compete for many of the same firms and workers,” said Aidan Enright, author of North Carolina and Massachusetts: Two Different Paths. “Over the past decade, North Carolina reduced rates, prioritized affordability, and simplified its tax code to improve its ability to attract firms and residents. Massachusetts made modest rate reductions and then added a major surtax. While real state revenues increased a little faster in the Commonwealth, it came at the cost of anemic employment and business growth, and significant outmigration.”
The proposed ballot initiative would reduce the Massachusetts personal income tax rate in equal increments over three years beginning in 2027. The analysis is intended to inform that decision by providing a direct comparison with a state that implemented sustained reductions in tax rates and changes to its tax base over the past decade.
