Evaluating the Massachusetts Millionaires Tax
This November, Massachusetts voters will decide whether to raise taxes on high-earning residents and funnel the money to education, roads, bridges, and public transit.
It’s part of a ballot question known informally as the “Millionaires Tax” or the “Fair Share Amendment,” which would alter the state constitution to introduce a 4 percent surtax on annual income over $1 million.
Though this tax would only apply to around 0.6 percent of Massachusetts households in any given year, it could raise a meaningful amount of money, as those few households account for more than one-fifth of all taxable income in the state
However, the millionaires tax also could have some serious side effects if top earners opt to leave the state or shield their income to avoid paying.
Building on the latest economic research, and examining how similar taxes have affected other states, we find that:
- Factoring in expected behavioral changes by high earners, the Massachusetts millionaires tax would raise about $1.3 billion in 2023 — and do so in a highly progressive way likely to advance racial and economic equity.
- Some high-income residents may relocate to other states, but the number of movers is likely to be small.
- Tax avoidance could be widespread, cutting substantially into the amount of revenue raised by the levy.
- Together, cross-border moves and tax avoidance would reduce millionaires tax revenue by roughly 35 percent. (Absent these responses, the tax would be expected to raise $2.1 billion in 2023.)
- Any short-term impact on the Massachusetts economy is likely to be negligible. The long-term economic effect depends on whether the state durably increases the size of transportation and education investments or instead uses this money to sup- port already-planned spending.