Editor's note - Beacon HIll lawmakers will vote on Wednesday whether to place on the 2018 statewide ballot a proposed constitutional amendement that would impose a four percentage-point surtax (an 80 percent increase) on incomes of more than $1 million. AIM opposes the Constitutional Amendment Tax Trap and will look at the myths and facts surrounding the issue each day through Wednesday.
Myth: Without new tax revenue, Massachusetts’ economy will suffer.
Fact: Massachusetts is thriving right now and our economy is expanding. Unemployment rates remain low and state tax revenues are at an all-time high.
During the past 20 years, Massachusetts has taken positive steps to shed much of its “Taxachusetts” moniker and high-tax brand. Adoption of the proposed tax increase would be a damaging step backward for the state. It will send the wrong message to many job creators and entrepreneurs: namely if you come to Massachusetts and succeed, we’ll punish you.
Myth: The new tax will help stabilize and strengthen the state’s financial foundation.
Fact: The proposal would inject significant instability into the state’s finances by adding billions of dollars in new, permanent special-interest spending to the state budget based upon on a volatile, non-recurring revenue stream.
Other states that have made the same mistake have found themselves in dire budgetary crises when estimated revenue failed to materialize. This year, Connecticut budget makers saw anticipated tax revenues drop by a staggering $450 million, putting the lie to a long history of promises that new and additional taxes on high income earners would solve the state’s fiscal challenges.
On April 28, Connecticut’s Democratic Governor Dannel Malloy was forced to acknowledge the state’s failed policy of trying to support ever-increasing state spending a too-narrow group of high income earners, publicly admitting "Connecticut is too dependent on our highest-income earners for our revenue.”
(Sources: Maryland Public Policy Institute; Hartford Courant 4.28.17)
Myth: Impacted taxpayers will remain in Massachusetts and pay the increased taxes.
Fact: The recent experiences of other states indicate that retirees and high-income earners often relocate to lower tax states in response to increased taxes.
Within three years of Maryland enacting its “millionaire tax,” 40 percent of the state’s seven-figure earners were gone from the tax rolls - and so was $1.7 billion from the state tax base.
Similarly, in 2010 Boston College researchers released a report on the migration of wealthy households to and from New Jersey. They concluded that wealthier New Jersey households did in fact consider the high-earner taxes when deciding whether to move to or remain in New Jersey.
The researchers’ data analysis found that from 1999 to 2003 - before the millionaires’ tax was imposed- there was a net influx of $98 billion in household wealth into the state. After the tax was implemented, an increasing number of wealthy families left the state, resulting in a loss of $70 billion in wealth.
(Source: Wall Street Journal, 2.7.12; Center on Wealth and Philanthropy at Boston College)