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

Forsaking Massachusetts’s Miracle: Risking Our Future With Past Mistakes

This week on Hubwonk, host Joe Selvaggi talks with Greg Sullivan, Research Director at Pioneer Institute and author of Back to Taxachusetts?, about the link between Massachusetts’s decision to reduce tax rates and a generation-long economic renaissance - and the reasons why new taxes such as the proposed, so-called "Fair Share Amendment" risk taking us back to economic stagnation or decline.  

Massachusetts Tax Revenues Surpass Pre-Pandemic Levels

0 Comments
/
Pandemic recovery and then some! Massachusetts revenues are higher than anyone was expecting, but where is all the money coming from? And what does this mean for the Massachusetts economy?

Yuliya Tarasava Invests In Americans Who Need It Most

This week on JobMakers, host Denzil Mohammed talks with Yuliya Tarasava, immigrant from Belarus and cofounder and chief operating officer at CNote, a platform that helps facilitate investment in financially underserved communities across America.

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.

Jackie Krick Trains the Next Generation of Entrepreneurs

This week on JobMakers, host Denzil Mohammed talks with Jackie Krick, immigrant from Colombia and founder, president and CEO of ECU Communications in Manassas, Virginia. They discuss the entrepreneurial spirit of the newest Americans - immigrants - and why they are twice as likely to start a business and create jobs.

Progressive Policy Study: Californians Dreamin’ While Jobs and People Leavin’

Hubwonk host Joe Selvaggi talks with California Policy Center president Will Swaim about how the state’s ambitious policies have combined to stick its residents with the highest cost of living and a tax regime that discourages investment, innovation, and its vital entrepreneurial class.

Artur Sousa’s Social Entrepreneurship Pays Off

This week on JobMakers, host Denzil Mohammed talks with Artur Sousa, immigrant from Brazil and founder and CEO of Adopets, an online platform that simplifies the work done by shelters and improves the pet adoption experience. Adopets has over 40,000 registered users and maintains more than 300,000 adoption listings.

Karina Calderon on How Immigrant Entrepreneurs Help Cities Grow

This week on JobMakers, host Denzil Mohammed talks with Karina Calderon, deputy director of The Lawrence Partnership, about her work to help immigrant entrepreneurs drive economic growth in Lawrence, Massachusetts. The Lawrence Partnership is a collaboration of business and civic leaders started in 2015 that helps by incubating, training, assisting, loaning, basically doing everything they and their partners can to grow the city’s businesses.

Invisible Hand Revealed: Economic Lessons in Everyday Life

Hubwonk host Joe Selvaggi talks with Matthew Hennessey, Wall Street Journal editor and author of Visible Hand, A Wealth of Notions on the Miracle of the Market, about how the principles of economics manifest themselves in our every day lives and how we can use that insight to better understand our personal and civic choices.