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.
About Andrew Mikula
Andrew Mikula is Pioneer Institute's Economic Research Analyst. Research areas of particular interest to Mr. Mikula include land use issues, the cost of living, and tax and regulatory structures. Mr. Mikula was previously the Lovett & Ruth Peters Economic Opportunity Fellow at the Institute. He has a B.A. in economics from Bates College.
Entries by Andrew Mikula
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.
A new white paper by Pioneer Institute calls for increased transparency over the basis for payment in lieu of taxes (“PILOT”) agreements between municipal governments and nonprofit organizations, while also encouraging nonprofits to publicize and expand the community benefits they provide.
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.
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.
This report finds that a spate of new incentive and subsidy programs seeking to lure talented workers and innovative businesses away from their home states could constitute an additional challenge to Massachusetts’ economic and fiscal recovery from COVID-19.
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 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.”
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.
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.
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.
This study finds that a 2012 income and sales tax increase in California, named “Proposition 30,” stifled business activity, accelerated out-migration among the wealthy, and ultimately reduced the state’s tax base. It also aims to share empirical data about the impact of tax policy decisions.
Both employers and households will find it easier to leave major job centers as technologies made commonplace by the COVID-19 pandemic have led to a rethinking of the geography of work.
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.
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.
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 […]
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 […]
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 […]
In “A Snapshot of Massachusetts’ Construction industry during a Decade-long Building Boom,” data from 1998 through 2018 show variations in employment and the number of businesses within the construction industry throughout Massachusetts. The report even includes a map of employment concentration in the construction industry by town.
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.
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.
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?
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
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 […]
For most of America, reopening the economy after COVID-19 means being able to go to a barbershop, a local gym, or restaurant – all relatively mundane activities that happen to involve small crowds of strangers gathering in an enclosed space. But for some major cities, it means much more: a return to hosting large, touristy recreational events, international business conferences, and gubernatorial summits. In terms of public health protocol, the main difference between a barber shop and a major business expo (besides the size of the event, attire of the attendees, and number of TV cameras present) is that businesspeople are often willing to travel far and wide to attend prominent conferences. With this point of contrast comes a moral […]
Service-based industries have significantly outperformed manufacturing and other traditional blue-collar economic sectors in Massachusetts since 2008, according to a new report from Pioneer Institute that draws on data from the MassEconomix web tool.
As the initial economic recovery from the COVID-19 pandemic has slowed, a new study from Pioneer Institute finds that governments must continue to provide short-term relief to stabilize small businesses as they simultaneously consider longer-term reforms to hasten and bolster recovery – all while facing a need to shore up public sector revenues.
In recognition of the continued concerns COVID-19 poses to the sports management industry, particularly as many professional sports resume play in some capacity, Pioneer Institute has partnered with Nichols College to provide undergraduate college students an opportunity to solve problems pertinent to the present COVID-19 crisis in a rewarding, competitive format. The Institute is working to facilitate the adaptation of professional sports leagues to these challenging times for the benefit of the many communities, businesses, and individuals that depend on economic activity and personal enrichment from their activities. Keeping sports leagues viable during a global pandemic can be extremely challenging, and we believe this issue deserves more attention in advance of a potential resurgence of COVID-19 later in the […]
Since Major League Baseball finalized its reopening plans in late June, over 100 players have tested positive for COVID-19, throwing into jeopardy the prospect of completing a baseball season, however short, during a global pandemic. Now, a team of University of Massachusetts students are working to make sure that youth baseball organizations across the country aren’t put into the same quandary. During this year’s Pioneer Institute & Nichols College Sports Management Policy College Case Competition, Alvin He, Xinran Liu, and Minying Zhou won 2nd place for a policy proposal discussing adaptations little league players, coaches, and parents can make to stay safe while continuing to participate in America’s national pastime. In particular, the UMass students suggest that athletes […]
With a COVID-19 vaccine’s widespread availability still estimated to be sometime in 2021, the world faces a long winter in which the coronavirus will likely continue disrupting our daily lives by reshaping the realm of physical activity. Many of the most prevalent impacts of this ongoing hardship will be borne by children, whose physical and emotional development is greatly aided by participating in team sports. This year’s Pioneer Institute & Nichols College Sports Management Policy College Case Competition sought policy-driven adaptive solutions that will allow youth to continue participating in these sports even during a public health crisis. The winning team, consisting of Isabella Nerney, Dylan Pella, Adam Phillips, and Shannon St. Lawrence, all undergraduates at Nichols College, has […]