Editorial Staff

Proposition 80 Won’t Generate $1.9 Billion Annual Projected Revenue

/in , , , , /by Editorial Staff
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

Passage of November 2018 ballot measure will make Massachusetts far less competitive

BOSTON – Passage of Proposition 80, the tax hike proposal scheduled to appear on the November 2018 Massachusetts ballot, will fail to generate the level of revenue growth projected by its backers, according to a new Pioneer study.

Download "Proposition 80 Will Not Raise $2 Billion"

The ballot measure would add a 4 percent surtax on any annual taxable income over $1 million. In “Proposition 80 Will Not Raise $2 Billion and the Money Won’t Be Free,” Pioneer Institute Research Director Greg Sullivan warns that proponents’ projected revenue gains are based on a small pool of taxpayers, some of whom are likely to relocate outside the state if the proposal passes.

According to Massachusetts Department of Revenue data, the majority of the tax revenue Proposition 80 is expected to raise would derive from just 897 of the 19,565 taxpayers who would be subject to the measure. Over time, if even a third of those 897 chose to move, annual revenue from the tax would fall from an anticipated $1.9 billion to $1.1 billion.

The report further finds that there is a high likelihood that they will relocate, given that states with lower tax rates have historically held a distinct advantage in attracting and retaining businesses and wealthy taxpayers.

From 2011–12 to 2014–15, the eight states with no income tax saw a net positive migration of adjusted gross income (AGI) of $65 billion, more than 60 percent of which came from the small percentage of taxpayers with annual AGIs of $200,000 or more. During that same period, the eight states with the highest marginal income tax rates experienced negative AGI migration of $44.23 billion, over 60 percent of which resulted from the relatively small number of migrants with annual incomes of $200,000 or more.

“Those who argue that state tax rates don’t impact where high earners choose to live and where businesses choose to locate inhabit an alternate reality,” said Pioneer Institute Executive Director Jim Stergios. “Proposition 80 backers paint it as a harmless way to boost revenue, but its adoption would pose a direct threat to business and job creation in Massachusetts.”

IRS records show that over 70 percent of Massa­chusetts’ 16,100 taxpayers with AGI over $1 million in 2015 received income from partnerships and sub-chapter S corpo­rations. Proposition 80 would raise the combined federal/state tax rate on partnership and sub-S corporations from 26th to between the second and fourth highest in the U.S.

Large, medium and small businesses alike will face adverse consequences. Small business­es account for nearly half of total employment in Massachusetts. The report features case studies illustrating Proposition 80’s potential impact on three Massachusetts firms:  The RMR Group Inc. in Newton, Cape Cod Lumber in Abington, and Copilabs, Inc. in Lawrence.

About the Author

Gregory Sullivan is Pioneer’s Research Director. Prior to joining Pioneer, Sullivan served two five-year terms as Inspector General of the Commonwealth of Massachusetts and was a 17-year member of the Massachusetts House of Representatives. Greg holds degrees from Harvard College, The Kennedy School of Public Administration, and the Sloan School at MIT.

###

Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.

Get Updates on Our Economic Opportunity Research

Related Posts

Welcome to New Hampshire Sign: Live Free or Die

Study Warns that New Hampshire Tax Policies Would Exacerbate Impacts of a Graduated Income Tax

Drawing on migration patterns between Massachusetts and states like Rhode Island and Tennessee, Pioneer Institute is releasing a study showing a direct correlation between personal income tax rates and household domestic migration patterns between 2004 and 2019. The study suggests that instituting a graduated income tax will shrink the tax base and deter talented workers and innovative employers from coming to and staying in the Bay State.

Marathon Endurance Test: Leaders Pave the Way for Boston’s Return

Hubwonk host Joe Selvaggi talks with Boston Athletic Association’s CEO Tom Grilk about the leadership challenges of cancelling the world’s oldest continuous marathon, a $200-million benefit to the region involving eight municipalities and 10,000 volunteers, in the face of a pandemic - and how cooperation among stakeholders brought back the epic event to be run this October.

Study Finds SALT Deduction Cap, Graduated Income Tax Will Combine to More Than Double Tax Burden on Some Households

A provision of the federal Tax Cuts and Jobs Act of 2017 strictly limiting deductions for state and local taxes (SALT) will greatly exacerbate the adverse effects of a proposal to create a constitutionally mandated graduated income tax, according to a new study published by Pioneer Institute.

Jim Stergios on Why Immigrants Are Crucial to Our Success

This week on JobMakers, Host Denzil Mohammed talks with Jim Stergios, executive director of Pioneer Institute, about why Pioneer collaborated with The Immigrant Learning Center to produce this podcast. They discuss the overrepresentation of immigrants in terms of job creation in America, contrary to the myth that immigrants “take” jobs.

Economic Long Covid: Mixed Health Messages for Baystate Businesses

Hubwonk host Joe Selvaggi talks with NFIB’s Chris Carlozzi and Retailers Association of Massachusetts' Jon Hurst about the challenges and future prospects for businesses as they adapt to widespread consumer confusion caused by vague and often conflicting public health messaging from our political leadership.

Jeff Goldman on How Immigrants Keep America Competitive

This week on JobMakers, Host Denzil Mohammed talks with Jeff Goldman, immigration attorney and Chair of Massachusetts Governor Charlie Baker’s Advisory Council on Immigrants and Refugees, about how best to ensure that highly skilled and innovative immigrants can remain in the U.S., start companies, and create jobs for Americans.

Trevor Mattos Shows How Massachusetts Runs on Immigrants

This week on JobMakers, Host Denzil Mohammed talks with Trevor Mattos, research manager at Boston Indicators, the research center at The Boston Foundation, which educates state and local leaders on the important contributions immigrants are making. They discuss the urgency of this work, particularly in a time of divisive disinformation about immigrants and the uncertainty of the pandemic, and some of the surprising findings on the disproportionately large impact immigrant workers, entrepreneurs and innovators are having on the local economy

Danielle Goldman on Why the U.S. Needs Immigrant Talent

This week on JobMakers, Host Denzil Mohammed talks with Danielle Goldman, Co-Founder and Executive Director of the Open Avenues Foundation in Boston, about their work to help high-growth companies and start-ups retain the high-skilled, foreign-born talent they need through cap-exempt H-1B visas.

Study Suggests How to Advance Fairness, Predictability of “Payment in Lieu of Taxes” Programs Aimed at Nonprofits

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.