Globe columnist Shirley Leung makes our argument on the tax hike amendment

Share on Facebook
Share on Twitter
Share on
LinkedIn
+

In today’s Boston Globe, business columnist Shirley Leung raises important questions about who exactly will be impacted by the tax hike amendment that will appear on the Massachusetts ballot in November. Shirley notes:

Yet the first ad from the opposition, which debuted last week, paints a different picture of who could get hit with the proposed hike: farmers, lobstermen, small business owners, and even homeowners. That’s because “they” include so-called one-time millionaires.

She cites a Tufts University analysis showing that “the pool of wealthy households in Massachusetts changes dramatically year to year with only about half consistently earning incomes of more than $1 million,” and describes some of the people who oppose it.  Pioneer presented the actual numbers, from Massachusetts Department of Revenue data, in its The Graduated Tax Trap study (April 2021): The majority (60 percent) of the families that would be impacted by the tax proposal earned more than a million dollars once or twice in the 10-year period surveyed through 2017; these are retirees and small businesses selling assets to build a nest egg that will have to serve them over 20 or 30 years.  Fewer than 25 percent of families regularly earned more than $1 million.

These people include Ann Sullivan, who owns Metro Equipment Corp. in Braintree. As Shirley describes,

Ann also does not consider herself a millionaire, but she will be classified as one when she sells her excavation business… Sullivan figures that if she sells her company and nets $2 million, the first million will be taxed at the rate everyone pays, which is 5 percent, and then the next million dollars would be taxed at 9 percent. Instead of paying $50,000 in taxes on the next million dollars, she would owe $90,000 if the ballot question passes. Although a $2 million payday may seem like a lot of money to most people, Sullivan, 61, said the sale proceeds would constitute her retirement. “This is my nest egg,” Sullivan said. “When I stop working, I stop working. So every dollar is going to count.”

Pioneer’s research going back several years has shown that 46 percent of Massachusetts taxpayers who earn more than $1 million in a year do so just once over a decade, and it is derived from profits from the one-time sale of a business or home, usually – as with Ann Sullivan – to fund retirement.

Pioneer’s Jim Stergios and Mary Connaughton explain that very same point in this June video:

 

Pioneer’s book, Back to Taxachusetts?, devotes a whole chapter to this topic. As the book’s fact sheet summary notes,

The tax mainly impacts retirees and small business owners—not “millionaires” The majority of households ensnared by the tax hike are not “millionaires”—they do not regularly have incomes exceeding $1 million. They are households selling a business or seniors selling their home and assets to fund retirement. Pass-through businesses—partnerships, sole proprietorships, S or limited liability corporations that are taxed via individual returns—account for 70% of all for-profit entities and employ half of Massachusetts’ workforce. When added to other taxes that only apply to such entities, these small businesses would pay taxes at a higher rate than large corporations.

More recently, Pioneer’s Jim Stergios has noted this in The Wall Street Journal:

That tax revenue would come at a steep cost. Because the amendment’s definition of income includes capital gains and “pass-through” income from entities taxed via individual returns, such as partnerships, sole proprietorships and S corporations, the proposed tax would primarily affect retirees and small businesses.

And in a debate on Keller @ Large.

 

As Shirley notes at the conclusion of her column, how Massachusetts voters come down on this issue will be related to whether they themselves or someone they know expect to earn $1 million in a single year, and she argues, importantly, that “in an entrepreneurial economy and a housing market like ours, the answer is perhaps not that clear.”

Suddenly, as we’ve been showing through our research, more people are seeing that the impact of this tax is much greater than they thought – it’s not just the super wealthy.

We look forward to a robust discussion about this important topic, as we believe that if the public understands the full implications of this proposal – the faces of the retirees and small business owners who will lose their nest eggs and hard-won earnings – they will reject it decisively.

Get Updates on Our Economic Opportunity Research

Additional Pioneer reports on this topic:

Related Posts

Study: Legislators Must Answer Key Questions Before Setting Policy for App-Based Rideshare/Delivery Workers

After Massachusetts’ Supreme Judicial Court declared an initiative that was to appear on the November ballot unconstitutional, the issue of how to classify app-based rideshare/delivery workers is back in the hands of the state Legislature.  A new study published by Pioneer Institute distills from the research literature eight questions legislators must answer before determining how to address this fast-growing industry.

WSJ op-ed: Don’t Make Massachusetts ‘Taxachusetts’ Again

Unlike many blue states, Massachusetts has resisted the temptation to raise taxes on high earners. That antitax fortitude is about to be tested. In November, state legislators will ask voters to approve an amendment to the Massachusetts constitution adding a 4% surcharge to annual income over $1 million.

Pioneer Institute Expects That Massachusetts Taxpayers Will Be Refunded $3.2B Due To State Revenue Cap

Pioneer Institute projects that the state will refund approximately $3.2 billion to taxpayers due to a state law sponsored by Citizens for Limited Taxation and voted on by taxpayers in 1986 that caps the amount of revenue the state can collect in any given year.

Survey of Business Sentiment: MA Income Tax Hike Would Lead to Employer Exodus

Nearly three quarters (73 percent) of Massachusetts business leaders think business associates will leave the state if a constitutional amendment appearing on the November ballot to hike taxes is successful, according to a survey conducted by Pioneer Institute.

As States Compete for Talent and Families, Massachusetts Experienced a Six-Fold Increase in Lost Wealth Compared to a Decade Earlier

With competition for businesses and talent heating up across the country, in 2020 Massachusetts shed taxpayers and wealth at a clip six times faster than even just a decade ago. Between 2010 to 2020, Massachusetts’ net loss of adjusted gross Income (AGI) to other states due to migration grew from $422 million to $2.6 billion, according to recently released IRS data now available on Pioneer Institute’s Massachusetts IRS Data Discovery website. Over 71 percent of the loss was to Florida and New Hampshire, both no income tax states.

Book Reveals How Tax Hike Amendment Would Damage Commonwealth’s Economic Competitiveness

If adopted, a constitutional amendment to hike state taxes that will appear on the ballot in November could erase the hard-earned progress Massachusetts has achieved toward economic competitiveness over the last 25 years and may not result in any additional education and transportation funding, according to a new book from Pioneer Institute, entitled Back to Taxachusetts?: How the proposed tax amendment would upend one of the nation’s best economies, which is a distillation of two dozen academic studies.

Study Documents The Design Challenges, Contracting Issues, And Delays Facing New MBTA Fare Collection System

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.

Study: Legislature Likely to Reduce Spending on Education and Transportation from Other Revenue Sources, Replace Cuts with Surtax Money

Revenue from a ballot initiative to amend the state Constitution and raise income taxes on households and businesses by adopting a graduated income tax structure would supposedly provide resources for transportation and public education, but a new study published by Pioneer Institute finds that, were the tax amendment to pass, the money would be fungible and much of it likely spent on general budget measures.   

Study Finds Bus Rapid Transit Can Offer Cost-Effective Benefits

Bus rapid transit (BRT) incorporates unique features such as dedicated lanes to provide reliable and cost-effective service while reducing congestion and its detrimental environmental impacts, according to a new study published by Pioneer Institute.

Pioneer Supports Legal Challenge to Misleading Tax Ballot Language, Releases Video

Pioneer Institute supports the diverse and bipartisan group that filed a complaint with the Massachusetts Supreme Judicial Court (SJC) challenging the summary language meant to provide an accurate description of the tax hike amendment to voters. The language was approved by the Attorney General and Secretary of the Commonwealth when a similar amendment was proposed in 2018, and unless the lawsuit is successful, will likely appear on the Massachusetts ballot in November.

Study Raises Concern That Annual T Fare Evasion Costs Could Rise By More Than $30 Million Under AFC 2.0

According to the Federal Transit Administration (FTA), the MBTA’s $935.4 million fare collection system (AFC 2.0) that is scheduled to be implemented in 2023 will reduce fare evasion by $35 million over a decade. But the T announced in 2021 that evasion could actually increase by up to $30 million under AFC 2.0, and now a Pioneer Institute study warns that insufficient fare enforcement could drive that figure even higher under the new system.

Study: Tax Up For A Vote In November Would Ensnare Over Three Times More Taxpayers Than Previously Estimated

Analyses from the Massachusetts Department of Revenue (MADOR, 2016) and 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, according to a new study from Pioneer Institute.