The Fiscal Alliance Foundation and The Beacon Hill Institute (BHI) today released a study showing the effects of instituting a so called “Millionaire’s Tax” on the Massachusetts economy.
A full copy of the study is available here.
Speaker Ron Mariano and Senate President Karen Spilka have scheduled a vote on Wednesday to amend to the state constitution, paving the way for the voters to weigh in at the 2022 ballot box. If passed, high income earners and certain small businesses would see their state income tax increase by 80%, from 5% to 9%. The measure would eliminate the constitutional protection that mandates equal taxation and allow for lawmakers to tax some taxpayers at higher rates.
The study is the first time in recent memory that Massachusetts data was collected and used to determine the economic result if this tax were to become law. This is especially relevant because of the recent effects of COVID-19 on the state economy.
According to the study, the “Millionaire’s Tax” will be harmful to state’s economy and will result in lost jobs, investments, and disposable income. With its high economic costs in place, the tax would also bring far less revenue than what proponents currently claim. Contrary to their messaging, BHI found that the middle class would also feel the impact of this tax. For example, in 2023, more than 4,000 families would leave Massachusetts with employment dipping by nearly 9,000 jobs. To make matters worse, according to BHI, the tax will only bring in about half ($1.2 billion) of the amount politicians are claiming ($2 billion). The dramatic discrepancy in how much would be collected would most likely not result in a reduction in planned state spending, but rather, new taxes and fees falling on the middle class to make up for the low return from the tax.
“This debate is being fueled by lawmakers acting on their worst urges and impulses to spend more money they don’t have. They wish to radically change the state constitution, by removing a cherished and longstanding safeguard that protects taxpayers,” noted Paul D. Craney, a spokesman for the Fiscal Alliance Foundation.
“If successful, lawmakers would have the ability to tax some taxpayers more than others. The state constitution would not be able to protect taxpayers from the stigma of Taxachusetts and greed of State House politicians,” continued Craney.
The graduated income tax has been before the voters six past times and each time it failed to pass. More recently, the state’s highest court struck down an attempt in 2018 as it was considered “unconstitutional.” What makes this latest attempt different is that the effort is authored by lawmakers and not citizens. It’s politicians who want to change the constitution to remove safeguards intended to protect the taxpayers.
“Today’s study shows how the tax would not bring in nearly as much as the proponents first claimed. With its very high economic costs to the state’s most productive earners, the tax will be felt not just by wealthy individuals, but also by small businesses and the middle class. The tax will collect about half of what was advertised and its safe to say, spending will remain the same. The middle class and small businesses will have to make up for the difference,” concluded Craney.