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:

Other People’s Money: Fair Share’s Populist Promises and Problems

This week on Hubwonk, host Joe Selvaggi talks with Boston Globe columnist Jeff Jacoby about November’s Massachusetts Ballot Question 1, the so-called Fair Share Amendment. They examine both the merits and timing of a graduated state income tax, as well as the effects on society of creating separate categories of taxpayers, and the dangers of setting the many against the few.

Pioneer Institute Expects That Massachusetts Taxpayers Will Be Refunded $3.2B Due To State Revenue Cap

Pioneer Institute projects that the state will refund approximately $3.2 billion to taxpayers due to a state law sponsored by Citizens for Limited Taxation and voted on by taxpayers in 1986 that caps the amount of revenue the state can collect in any given year.

April Ryan Paints Her Way to Success

This week on JobMakers, host Denzil Mohammed talks with April Ryan, immigrant from Russia, founder and CEO of Red Iguana nail art products, and influencer to hundreds of thousands. April came to the U.S. from a poor town, speaking no English, but through tenacity and inventiveness, she achieved success by creating video tutorials of nail art, and developing a breakthrough product that became a bestseller in 19 countries.

What’s going on with the economy in Cambridge?

0 Comments
/
Dubbed the city of squares, Cambridge, a leading innovation center,…

Aki Balogh on How U.S. Diversity Drives Business

This week on JobMakers, host Denzil Mohammed talks with Aki Balogh, immigrant from Hungary and cofounder of MarketMuse, which created an artificial intelligence powered content intelligence and strategy platform; and cofounder of dlc.link, which aims to decentralize Bitcoin. Moving to the U.S. after fleeing post-communist Hungary, Aki and his family did whatever they could do to survive, and that included delivering newspapers and phone books, and even starting a computer repair business at 15, as a young teen.  Today, Aki is a pioneer in content intelligence technology and has created more than 90 jobs in the past eight years.

Chet Manikantan: Innovation Machine

This week on JobMakers, host Denzil Mohammed talks with Chet Manikantan, immigrant from India and founder of Aegis Studios, which builds crypto games. Chet was founder of a string of companies and a partner at two venture firms, but he was almost denied the opportunity to innovate and create jobs in the U.S. by our outdated immigration system, if not for a chance encounter that led to a workaround for select foreign-born entrepreneurs. And he’s keenly aware and grateful that this country gave him what he needed to succeed, as you’ll learn in this week’s JobMakers podcast. 

Pedro Zamora on Immigrant Entrepreneurs in Kansas City

This week on JobMakers, host Denzil Mohammed talks with Pedro Zamora, executive director of the Hispanic Economic Development Corporation of Greater Kansas City. Pedro and his organization work on initiatives that are crucial to the economic vitality of the area, and they’ve helped more than 4,700 businesses. Immigrants there are having an outsized economic and cultural impact, and so Kansas City is yet another example of how localities can bounce back and benefit from immigrants and refugees, as you’ll learn in this week’s JobMakers podcast.

Survey of Business Sentiment: MA Income Tax Hike Would Lead to Employer Exodus

Nearly three quarters (73 percent) of Massachusetts business leaders think business associates will leave the state if a constitutional amendment appearing on the November ballot to hike taxes is successful, according to a survey conducted by Pioneer Institute.

Looming Budget Crisis Reveals MBTA’s Dependency on Federal Funds

0 Comments
/
The MBTA is about to lose federal funding at a critical moment when ridership has not yet recovered. Will the state make up the difference?