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

Pioneer Institute Statement on the State Legislature’s FY2024 Tax Relief Package

The recent advancement of a tax bill H. 4104, that is expected to be enacted by the Legislature this week after languishing for more than 20 months, puts Massachusetts taxpayers one step closer to realizing some tax relief. However, it may be too little to tackle the Commonwealth’s affordability and competitiveness challenges.

Poll: MA Voters Oppose Legislative Proposals to Change Tax Rebate Law

A strong majority of registered Massachusetts voters oppose a plan recently announced by state legislative leaders that would change the way tax rebates are distributed in Massachusetts under a state law approved by voters in 1986, according to a new poll sponsored by Pioneer Institute and the Massachusetts High Technology Council.

A Tale of Two Massachusetts: Wealth and Labor Differences Between East and West

This blog compares the income, wealth, and property values of western Massachusetts to those of eastern Massachusetts, highlighting the west's potential for growth.

Senate Tax Package Misses the Mark on Competitiveness

The Senate tax package, S.2397, is heavy on provisions that reduce the tax burden for certain taxpayers, thereby helping those that qualify for the expanded credits and deductions. The bill, however, is light on provisions that will improve the Commonwealth’s competitiveness.

Study: Immigrant Entrepreneurs Benefit N.E. Economy, Despite Facing Obstacles to Growth

BOSTON – Immigrants in Massachusetts and New England are more likely to be self-employed, but the businesses they own tend to be in different industries than those owned by the U.S. born, according to a new study published by Pioneer Institute.
Image by Freepik

A Model for Occupational Licensing Reform in the Bay State

Licensing for many professions squeezes the supply of services, artificially inflating prices and creating wage premiums. One study from the Institute for Justice put the wage premium relative to an environment without any occupational licensing at a whopping 22 percent in Massachusetts.

Study Finds Massachusetts Workforce Has Become More Female, Older, More Diverse

The Massachusetts labor force has transformed in recent decades, with some of the biggest changes being the advancement of women, workers getting older and more diverse, and a divergence in labor force participation rates based on levels of educational achievement, according to “At a Glance: The Massachusetts Labor Force,” a white paper written by Pioneer's Economic Research Associate Aidan Enright.

New IRS Data Shows Out-Migration Worsening, Underscoring the Need for Massachusetts Leaders to Focus on State’s Competitiveness

Massachusetts’ net loss of adjusted gross income (AGI) to other states grew from $2.5 billion in 2020 to $4.3 billion in 2021, according to recently released IRS data. Over 67 percent of the loss was to Florida and New Hampshire, both states with no income tax.

Public Statement on the House’s Proposed Tax Reform and Budget

Pioneer Institute applauds key tax reform provisions advanced by the Speaker and House leadership, including a reduced short-term capital gains tax rate and implementation of a single sales factor apportionment. But leadership must do more to bolster the state’s economic competitiveness and slow out-migration of wealth and business owners that endangers the commonwealth’s economic future.