Editorial Staff

Study: Proposition 80 Would Give MA 2nd Highest Combined State & Federal Capital Gains Tax Rate in U.S.

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

Read coverage of this report in the Boston Herald: “Study: ‘Millionaire’s tax’ would hurt state” and the Boston Business Journal: “‘Millionaires’ tax’ would make Mass. an outlier in capital gains tax, says group”

Unlike federal government, gains could move taxpayers into higher state bracket 

BOSTON – If voters approve Proposition 80, scheduled to appear on the statewide ballot next year, Massachusetts’ top capital gains tax rate would go from 30th highest in the nation to fourth and the commonwealth’s highest combined state and federal rate would move from 25th to second, according to a new Policy Brief published by Pioneer Institute.

Download “Back to Taxachusetts Series: Capital Gains”

“Proposition 80 would have an outsized impact on capital gains,” said Greg Sullivan, the author of “Back to Taxachusetts Series: Capital Gains.”  “And one of the few things most economists agree on is that keeping taxes on investment low is critical to economic growth, job creation, and rising wages.”

The ballot initiative would put an additional 4 percent surtax on any annual income over $1 million.

Passage of the initiative would introduce an important difference between federal and state treatment of capital gains taxes.  The Internal Revenue Service essentially treats capital gains as separate from income tax rates in that capital gains income can’t push a taxpayer into a higher tax bracket.

Under Proposition 80, the 4 percent surtax would apply to all annual income over $1 million, meaning that capital gains income could push a taxpayer into a higher state bracket.

Under Proposition 80, the top state capital gains tax rate would rise from 5.1 percent to 9.1 percent.  In terms of national ranking, it would move Massachusetts from having the 30th highest top rate to the fourth.

Massachusetts’ highest combined state and federal rate would rise from 28.1 percent to 32 percent (states use different methodologies for calculating capital gains taxes, so the combined rate can’t always be determined simply by adding the state and federal rates).  In terms of its national ranking, Massachusetts would go from 25th to second.

Passage of Proposition 80 would also give Massachusetts the sixth highest capital gains tax rate in the world, behind just Denmark, Finland, France, Ireland, and California.

About the Author

Gregory W. 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 is a Certified Fraud Investigator, and holds degrees from Harvard College, The Kennedy School of Public Administration, and the Sloan School at MIT.

About Pioneer

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

Research on Economic Opportunity:

Dr. Celina Miranda on Immigrant Entrepreneurs & Community Uplift

This week on JobMakers, host Denzil Mohammed talks with Dr. Celina Miranda, executive director of the Hyde Square Task Force in Jamaica Plain’s Latin Quarter, today one of the most diverse neighborhoods in Massachusetts.

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.   

Theresa Park on How Immigrants Revitalize U.S. Cities

This week on JobMakers, host Denzil Mohammed talks with Theresa Park, Deputy Director and Senior Executive Vice President at MassDevelopment, a group that offers financing and real estate solutions to drive economic growth across Massachusetts. An immigrant from Korea who moved to Lawrence, Massachusetts, Theresa saw first-hand how immigrants built their lives from the ground up, and in so doing brought economic and cultural vibrancy to their new home cities.

Reinier Moquete on the Audacity of Immigrant Entrepreneurship

This week on JobMakers, host Denzil Mohammed talks with Reinier Moquete, son of immigrants from the Dominican Republic and founder of CyberWarrior, a cyber security services provider in Boston, Massachusetts.

Dinesh Wadhwani Clears the Air with Light Technology

This week on JobMakers, host Denzil Mohammed talks with Dinesh Wadhwani, founder and CEO of ThinkLite, LLC in Natick, Massachusetts, and immigrant from Ghana.

Transit Innovation Explored: A Bus As Fast As A Train?

Hubwonk host Joe Selvaggi talks with transportation expert Ian Ollis about the findings of his new research paper, "Bus Rapid Transit: Costs and Benefits of a Transit Alternative," which examines the benefits of building Bus Rapid Transit to serve communities looking for faster transit alternatives to a car.

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.

Anuradha Sajjanhar, PhD on Immigrants’ Role in Pandemic Recovery

This week on JobMakers, host Denzil Mohammed talks with Dr. Anuradha Sajjanhar, lead researcher for the report Immigrant Essential Workers During the COVID-19 Pandemic published by The Immigrant Learning Center, co-producer of this podcast. She found that immigrants, despite playing an outsized role in industries deemed essential such as healthcare, food and agriculture, and the supply chain, were largely left out of federal and state support during the pandemic, which negatively affected their safety and their efforts to help Americans weather this crisis. The report offers a path forward, as you’ll learn in this week’s JobMakers.

Fair Share Flimflam: Misleading Ballot Summary Could Distort Voter Choice

Joe Selvaggi talks with Attorney Kevin Martin, appellate litigator at Goodwin Proctor, about the complaint filed with the Massachusetts Supreme Judicial Court regarding the summary language on the 2022 "Fair Share Tax” ballot initiative. Kevin explains how the language misleads the public about the impact of their vote on revenue, spending, and our state’s constitution.