State Tax on Capital Gain

Out of all the states I could have been living I had to be in Massachusetts. Don't get me wrong, I love this state, but short term capital gains are taxed at a ridiculous rate of 12%! That means up to 47% of all my short term capital gains are paid back to the government. Yikes!

Interestingly, to me, the federal taxes long term capital gain is at 15% and Massachusetts takes 5%. So if I hold a stock for one year or more and sell it with a net gain, I am only taxed 20%. I did further research into the Massachusetts tax laws and found the following excerpt in the 2006 Guidebook to Massachusetts Taxes. (Listed on Pg 38)

Sorry for the small tax size but I didn't feel like typing every word of the excerpt.

What is interesting is in Part C the former method for taxing capital gains in Massachusetts was a huge incentive to long term share holders. If a stock was held for six years or longer and the owner sells it he/she would not have their net gains be taxed under the state's tax laws. Remarkable, but unfortunately they amended Part C at the end of 2001. Darn it! One more reason to hold stocks short term. To me 5% or 12% is not that much of a difference if I consider gaining on every short term trade. I know that's highly unlikely.

Oh if I am wondering, yes to date I have not filed my 2007 taxes yet. I still have two weeks.... give or take a few days.