Charles Chieppo

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

/in , , /by Charles Chieppo
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:

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

Study: “Millionaire’s Tax” Would Have Far-Reaching Effects on “Pass-Through” Businesses

New Study Warns Graduated Income Tax Will Harm Many Massachusetts Retirees

Study: Graduated Income Tax Proponents Rely on Analyses That Exclude the Vast Majority Of “Millionaires” to Argue Their Case

Related Posts

New Policy Brief on Federal Relief Act’s Impact on Massachusetts

0 Comments
/
Greg Sullivan and Charlie Chieppo review the impact of the Coronavirus Aid, Relief, and Economic Security Act on Massachusetts' budget.

Congress should fix aid, provide block grants

0 Comments
/
This op-ed by Greg Sullivan and Charlie Chieppo appeared in the…

Public Statement: Extend Massachusetts’ Income Tax Filing Deadline

0 Comments
/
Massachusetts must extend the tax filing deadline, just as the federal government and 34 of the 41 states that tax income have done.

Why Are We So Scared And Impatient?

0 Comments
/
This op-ed by Barbara Anthony appeared in WGBH News on March…

Financial Disclosures – As Important Now as Ever

0 Comments
/
News sources report that certain senators sold stocks just before the market crashed when the economic impact of Coronavirus came to light. Now more than ever, financial disclosures must be accessible to the media and to the public.

Public Statement on Massachusetts’ Emergency Order Aiming to Curb the Spread of the Coronavirus

Governor Baker’s issuance of an emergency order is a wake-up call to recognize the extraordinary actions needed at this moment to stem the upsurge in coronavirus infections. It is also a reminder to be vigilant about our liberties. 

Pioneer Report Offers Framework for Improving Greater Boston’s Global Competitiveness

Pioneer’s new report, Greater Boston as a Global Competitor, provides useful metrics to help Massachusetts formulate a strategy to become an even more attractive place for innovators and talent.

Pioneer Institute Announces New Economics Data Tool: MassEconomix

A new addition to Pioneer Institute’s Mass Watch data tool suite, MassEconomix, provides time-series data on job and business growth for all of Massachusetts. Pioneer has partnered with the Business Dynamics Research Consortium (BDRC), which is housed at the University of Wisconsin’s Institute for Business and Entrepreneurship, to acquire an employment database known as “Your-economy Time Series”, or YTS. This database provides a year-by-year look at companies and jobs that have existed in the Commonwealth since 1997.

Pioneer Urges MassDOT to Reconsider At-Grade Throat Option for I-90 Allston Multimodal Project

Pioneer's new Public Comment calls on the Massachusetts Department of Transportation to revise its Scoping Report on the I-90 Allston Multimodal Project and recommend an additional option to the Federal Highway Administration.

New Study: Excessive Occupational Licensing Hurts State Economy, Reduces Tax Revenue

Overly burdensome occupational licensing requirements not only slow down the Massachusetts economy and cost the state tens of thousands of jobs, but also reduce state and local tax revenue, according to a new study published by Pioneer Institute

Study Calls for Easing MBTA Procurement Restrictions and Beefing Up Project Management Capacity

Reforms needed if T is to achieve increased capital spending…