Entries by Andrew Mikula

What’s Included in Massachusetts’ $5.2 Billion Housing Bond Bill?

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On August 1, 2024, the Massachusetts state legislature finalized and passed a $5.2 billion housing bond bill meant to address a dire shortage of affordable homes. Governor Maura Healey has until August 11 to sign the bill into law, and she will almost certainly do so after naming housing costs “our highest priority as an administration” earlier this year.  The biggest budget item in the bond bill, a full $2 billion, will fund the upkeep, renovation, and redevelopment of locally-owned public housing. In recent years, local officials and housing advocacy groups have raised the alarm over neglected maintenance and safety hazards in these buildings, which house more than 70,000 people statewide. Most units in the state’s public housing inventory are […]

The Housing Crisis has a Hand in Massachusetts Out-migration Trends

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Recently published IRS data shows that net out-migration from Massachusetts among young adults ages 26-34 is the highest on record. Some 9,498 more taxpayers in this age bracket moved out of Massachusetts than moved in during 2022, up from 9,241 in 2021 and 1,769 in 2012. In 2022, the net loss of taxable income in Massachusetts from 26-34-year-olds moving out topped $1 billion for the first time. For every 100 tax filers in this age group who moved out in 2022, only 76 moved in, down from 93 in 2012.   Figure 1: Effect of 26-34-year-olds Moving on Number of Taxpayers and Taxable Income in Massachusetts Figure 2: Ratio of 26-34-year-old Tax Filers Moving Into Massachusetts to Those Moving Out […]

Mayor Wu’s Office to Residential Conversion Pilot Program Prioritizes Downtown Revitalization over Housing Production, Fiscal Responsibility

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In July 2023, in response to a soft post-COVID office market and a daunting housing crisis, Boston Mayor Michelle Wu created a Downtown Office to Residential Conversion Pilot Program. The program uses property tax breaks of up to 75 percent of the assessed value for 29 years to incentivize property owners to convert Downtown Boston office space to apartments or condos. The program also requires the converted residential properties to conform to the city’s stretch energy code and inclusionary zoning policies for new development and institutes a 2 percent real estate transfer tax on future sales of those properties.  Applications for the program were originally due by June 2024, with construction due to start on the conversions by October 2025. […]

The MBTA’s Automated Fare Collection Modernization Contract: Over-Budget And Behind Schedule, But Now Back On Track

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This new study unearths previously unseen communications between the MBTA and its contractors, showing that the MBTA’s efforts to modernize its fare collection system, including allowing payments with credit cards and bringing “tap and go” technology to Commuter Rail and ferry lines, was riddled with technological challenges and difficulties overseeing contractors as early as 2019, culminating in a 3-year delay to the project’s full implementation. The report also highlights key insights regarding the MBTA’s administrative capacity and hiring efforts needed to oversee the project’s implementation.

A Vision for Sustainable, Transit-oriented Development

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In this public comment, Pioneer Institute examines the Massachusetts Department of Housing and Community Development’s guidelines on how localities can comply with new zoning mandates around MBTA stations. While some of the compliance criteria and goal-setting language need further clarification and adjustment, overall Pioneer Institute is supportive of the vision for sustainable, transit-oriented development which, if properly implemented, will expand economic opportunity to a new generation of the state’s residents.

The MBTA’s Looming Bus and Green Line Fare Evasion Crisis

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This report warns that the MBTA will likely face a fare evasion crisis when it transitions to all-door boarding on buses, the Green Line, and the Mattapan trolley in 2023. General Manager Steve Poftak and MBTA staff have signaled the potential for a $25–30 million spike in fare evasion costs when the new AFC 2.0 system is implemented unless the MBTA institutes meaningful, enforceable penalties for fare evaders. In this report, Pioneer Institute makes recommendations for managing the AFC 2.0 contract and related fare evasion procedures going forward.

A Timely Tax Cut: How New Hampshire is Taking Advantage of Massachusetts’ Graduated Income Tax Proposal

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As Massachusetts voters weigh an amendment to the state constitution to enact a surtax on million-dollar earners, they should be cognizant of how the policies of other states could interact with the tax hike to encourage an exodus of jobs and capital, especially in proximate jurisdictions. New Hampshire is a neighboring state that has already benefited from out-migration from Massachusetts to the tune of over $426 million in taxable income in 2019 alone. A new budget amendment there, passed in July 2021, will eliminate the interest and dividends tax by 2027, contributing to a divergence in tax policy that might attract an increasingly mobile workforce and entrepreneurial base.

The SALT Cap: An Accelerator for Tax Flight from Massachusetts

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After the authors of the proposed graduated tax in Massachusetts submitted their proposal for legislative approval in 2017, the federal government placed a $10,000 limitation of deductibility of state and local taxes on federal tax returns. This unforeseen change in the federal tax code had the effect of turning what would have been a 58 percent increase in average state income tax payments among Massachusetts millionaires, from $160,786 to $254,355, into what is essentially a 147 percent increase when the federal SALT limitation is included in the calculation. This substantial change should be taken into consideration by voters when they contemplate approving the surtax proposal.

Tax Flight of the Wealthy: An Academic Literature Review

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A new literature review by Pioneer Institute shows that many existing academic studies find that wealthy individuals are particularly sensitive to changes in tax policy. Other studies explicitly warn policymakers that behavioral responses to taxing the rich could erode the tax base and ultimately strain state budgets. The Pioneer Institute study ties the results of these academic pieces into Massachusetts’ current graduated income tax proposal. 

Are Massachusetts taxes regressive? A common argument for a graduated income tax relies on a deeply flawed and outdated study 

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Advocates of the proposed surtax paint a picture of the Massachusetts tax system as highly regressive. They fail to mention that ITEP, the organization that produced the data upon which they rely, rated Massachusetts as having a more progressive tax system than 29 other states. ITEP fails to adequately explain their model’s treatment of the tax incidence of sales, excise, and property taxes, and they exclude a number of other aspects of the tax code that make it seem artificially regressive.

A Grim Distinction: Massachusetts would have top marginal short-term capital gains tax rate in the U.S. under the proposed graduated income tax

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This report finds that, under a graduated income tax, Massachusetts’ top marginal short-term capital gains tax rate would be the highest in the nation, exacerbating a tax and regulatory environment that has made it hard for day traders and other investors to contribute to Massachusetts’ economy. By imposing a 4 percent income on all annual income over $1 million, including capital gains, the graduated income tax would penalize the capital formation that is the key to long-term growth and higher living standards for all in the Commonwealth.

The Great Mismatch: The graduated income tax proposal’s gravely flawed escalation factor

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The state constitutional amendment proposed by the Service Employees International Union and the Massachusetts Teachers Association to add a 4 percent surtax to all annual income above $1 million purports to use cost-of-living-based bracket adjustments as a safeguard that will ensure only millionaires will pay. But historic income growth trends suggest that bracket creep will cause many non-millionaires to be subject to the surtax over time, according to this report, “The Great Mismatch: The graduated income tax proposal’s gravely flawed escalation factor.”

The Graduated Income Tax Trap: A retirement tax on small business owners

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This report finds that, if passed, a constitutional amendment to impose a graduated income tax would raid the retirement plans of Massachusetts residents by pushing their owners into higher tax brackets on the sales of homes and businesses. The study aims to help the public fully understand the impact of the proposed new tax. 

Missing the Mark on Wealth Migration: Past Studies Drastically Undercounted Millionaires

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Advocates of a constitutional amendment that would apply a 4 percent tax on all annual individual income over $1 million argue that similar taxes in other states have had little impact on the migration of millionaires, citing the research of Cornell University Associate Professor Cristobal Young, which suggests that “millionaires’ taxes” enacted in other states similar to the one being proposed in Massachusetts have had little impact on millionaire mobility. This paper demonstrates that he drastically undercounts millionaires, and outlines several ways in which he and tax advocates underestimate the number of people who will at some point in their lives be subject to a so-called millionaire’s tax and tax flight trends.

Lessons for Massachusetts from California’s “blank check” tax on high earners

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Advocates claim a proposed 4 percent surtax on high earners will raise nearly $2 billion per year for education and transportation, but similar tax hikes in other states resulted in highly discretionary rather than targeted spending. That same result or worse is possible in Massachusetts because during the 2019 constitutional convention state legislators rejected — not just one, but two — proposed amendments requiring that the new revenues be directed to these purposes. After a 2012 tax hike in California aimed to increase education investments, the state legislature dedicated little more than the minimum required by law to education and redirected the majority of the funds to general government operations. The result was a soaring state payroll.

Do The Wealthy Migrate Away From High-Tax States? A Comparison of Adjusted Gross Income Changes in Massachusetts and Florida

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Massachusetts had a net outflow of $20.7 billion in adjusted gross income (AGI) between 1993 and 2018. The biggest beneficiaries of the wealth that fled the Commonwealth were Florida, which captured 47.5 percent of it, and New Hampshire, which captured 26.1 percent. Between 2012 and 2018, Florida saw a net AGI inflow of $88.9 billion. Affluent taxpayers are responsible for an outsized proportion of state tax revenue. The data also show a strong correlation between state taxes and migration. States like Florida and New Hampshire that have no state income tax have seen a net inflow of AGI from higher-tax states like Massachusetts. 

Connecticut’s Dangerous Game: How the Nation’s Wealthiest State Scared Off Businesses and Worsened Its Fiscal Crisis

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This report presents evidence that Connecticut’s embrace of an aggressive tax policy to pay for ballooning government expenditures — including a sharp corporate tax rate increase — has been a major driver in the loss of bedrock employers. Higher corporate tax rates, combined with hikes in the personal income tax and, especially, the estate tax, also appear to be a factor driving away a growing number of the state’s wealthiest residents.

Massachusetts is in the middle of a budget crisis. So why is it still subsidizing out-of-state horse owners?

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In 2021, the Massachusetts legislature will consider raising taxes on corporations and wealthy individuals to finance social services in the Commonwealth during a challenging budget season. Proponents claim such an approach is necessary to avoid cuts to crucial services like healthcare and education.  Meanwhile, there are a number of state government programs that defy sound fiscal sense. Unlike raising taxes on the wealthy, it’s often politically difficult to cut these programs because a small group of people depend on the subsidies they provide for their livelihoods, paid for by the rest of the populace. Take the horse breeding industry as an example. A recent update to MassOpenBooks.org, a government transparency data tool operated by Pioneer Institute, shows that Massachusetts has […]

To Keep Worcester’s Polar Park Project Alive during COVID-19, Focus on the Community

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While COVID-19 has halted sporting events across the world, it’s also thrown a wrench in franchises’ future plans. The Boston Red Sox’ triple-A affiliate was in the midst of relocating from Pawtucket, Rhode Island to Worcester, Massachusetts when the pandemic struck. COVID-19 has led to construction delays of the new stadium in Worcester, Polar Park, and left plans for the 2021 season in flux. Now, a group of Eastern Connecticut State University students are working to make sure that, during an uncertain time for their team and sports in general, the WooSox have their priorities straight.    During this fall’s Pioneer Institute & Nichols College Sports Management Policy College Case Competition, Nikita Biahliak, James Callaghan, and Keira Integlia won 2nd […]

Pioneer recognizes students’ thoughtful approach to stadium financing, adjacent redevelopment in Worcester

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Even as the construction of Polar Park, a new minor league baseball stadium in Worcester, Massachusetts, was plagued by cost overruns, Worcester city officials aimed to use “no existing city tax revenue…to fund the ballpark construction.” Instead, they would essentially pay for the nearly-$100 million project by levying additional property taxes on adjacent development that was slated to sprout up around the new stadium. But as COVID-19 has dampened demand for hotel rooms and office space, and the developer has revised estimates for the apartments’ completion dates and market values, the stadium’s financing could look very different going forward.         This fall’s Pioneer Institute & Nichols College Sports Management Policy College Case Competition asked students to craft adaptive solutions to […]

A Checklist for How to Revitalize the Industries Hit Hardest by COVID-19

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This checklist combines the recommendations of studies published earlier this year offering recommendations for policy makers, organized in three sections: Immediate Relief, Tax Policy Changes and Permanent Reforms.  Business owner recommendations are split into COVID-19 Health and Safety Protocols, Expanded Services and Steps to Improve Cash Flow.

Before COVID-19, the Hospitality & Food Industry was a Service Sector Economic Powerhouse

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A new report from Pioneer Institute, “Before COVID-19, the Hospitality & Food Industry was a Service Sector Economic Powerhouse,” draws data from the MassEconomix web tool to analyze Hospitality and Food Industry employment across the state. Data spanning two decades from 1998 through 2018 show fluctuations in employment, firm size, and the share of businesses within the Hospitality and Food Industry throughout Massachusetts. The report shows a map of employment concentration in the Hospitality and Food Industry by town.

Targeted government help for small business is needed

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Covid-19 will frame economic policy discussions for years to come, just as the Great Recession did a decade ago. The economic impact of the pandemic includes widespread job losses, and millions of Americans are at risk of falling into poverty. Covid-19 is also accelerating pre-existing market trends – such as automation and online shopping – and their potentially devastating impact on the thousands of small businesses vulnerable to these market shifts. Will these businesses be able to adapt?

Economic Revitalization and Reinvention in Lowell, 1998-2018

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In “Economic Revitalization and Reinvention in Lowell, 1998-2018,” two decades of data show fluctuations in employment, firm size, and the share of businesses throughout various sectors in Lowell. Manufacturing tops the list of industries to add the most jobs in Lowell from 2008-2018, with Education and Health Care also comfortably outpacing other industries. It’s unclear how exactly COVID-19 will affect these trends in the long-term. Download the report here: Economic Revitalization and Reinvention in Lowell, 1998-2018

In light of COVID-19, Massachusetts should rethink its convention center bureaucracy

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Right before commercial real estate values in the U.S. started plummeting earlier this year, Massachusetts officials seemed to finally come to a consensus over the proposed sale of the Hynes Convention Center in the Back Bay. Privatization of the Back Bay property was slated to fund a 200,000-square foot expansion of another state-owned convention center, the Boston Convention and Exhibition Center or “BCEC.” Now, Boston’s weak commercial real estate market renders this plan entirely unappealing, largely because the Hynes probably couldn’t fetch its full Fiscal Year 2020 value of $176 million.   Moreover, during a deadly pandemic, it hardly makes sense to pour more public funds into indoor spaces that rely on large crowds to make money, especially when their […]