Entries by Greg Sullivan

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

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.

Why the Legislature would likely use the proposed tax amendment as a blank check

This report shows that the plaintiffs in Anderson v. Healey have good reason to demand a more accurate description of the graduated income tax amendment. Experience from other states and the actions of the Massachusetts Legislature demonstrate that voters should be given a more realistic picture of how the revenue is likely to be spent before going to the polls in November.

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

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.

The Great Understatement: Far more taxpayers and businesses than previously estimated will be affected by the proposed surtax

This report finds that analyses from the Massachusetts Department of Revenue (MADOR, 2016) (and more recently, Tufts University’s Center for State Policy Analysis (2022)) dramatically underestimated the number of households and businesses impacted by the constitutionally-imposed tax hike that the legislature is putting before voters in November 2022. The proposed tax would impact multiples of the number of people previously estimated, over a nine-year period, since the majority of “millionaires” only earn $1 million once during that time.

The Far-Reaching Impact of a Massachusetts Surtax: Anecdotal Evidence and Data Analysis

This report shows that a proposed graduated income tax that will appear on the statewide ballot in November 2022 will have much more far-reaching implications than most people realize because the surtax also extends to “pass-through” income from entities such as S and limited liability corporations, partnerships, and sole proprietorships that are taxed on individual tax returns.

The SALT Cap: An Accelerator for Tax Flight from Massachusetts

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.

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 A common argument for a graduated income tax relies on a deeply flawed and outdated study 

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

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 Graduated Income Tax Trap: A Tax on Small Businesses

This policy brief finds that the state constitutional amendment promoted by the Massachusetts Teachers Association and the Service Employees International Union to add a 4 percent surtax to all annual income above $1 million will adversely impact a significant number of pass-through businesses, ultimately slowing the Commonwealth’s economic recovery from COVID-19.

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

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

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

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

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

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

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.

Public Policy Guide for Economic Recovery from COVID-19 in the Retail and Hospitality Sectors

This new guide to economic recovery in the retail and hospitality industries published by Pioneer Institute calls for the federal and state governments to consider consumption-based refundable tax credits for brick and mortar businesses; the federal government to conduct a detailed study of the costs and benefits of suspending employer-side payroll taxes; businesses to pay special attention to developing and marketing their cleanliness, hygiene and contactless procedures; and third-party customer review sites to include comments about the implementation of COVID safety measures to provide options and reassurance to safety-minded consumers.

As the COVID-19 Pandemic Spurs Consumer Shift to E-Commerce, the Massachusetts Sales Tax Collection System Deserves Renewed Scrutiny

At a time when state tax revenues are plummeting, a plan to modernize sales tax collection could get money into state coffers more quickly. This report analyzes the merits of a two-part proposal Governor Baker included in his January state budget submission to streamline state sales tax collections. Sullivan and Mikula find that the first part of Baker’s plan makes sense and is entirely feasible because advances in electronic data processing and electronic funds transfer have eliminated the need for protracted remittance timetables.

The Federal Coronavirus Relief Act impact on Massachusetts

Congress has passed the Coronavirus Aid, Relief, and Economic Security Act, providing $2.2 trillion in financial relief to laid-off workers, hospitals, and distressed industries. The bill provides an extra $600 per week in unemployment benefits to each recipient for up to four months and extends benefits to previously ineligible categories of workers, including independent contractors, those with limited work history, and self-employed persons.