Painting a Phony Rosy Picture By Numbers: 7 Reasons the Institute for Policy Studies Gets It So Wrong
“‘All is for the best, in the best of all possible worlds,’ said Candide — just before disaster struck yet again.”
The Institute for Policy Studies’(IPS) report on millionaire surtaxes reads much the same way: a rosy story spun from selective numbers, wishful thinking, and an eagerness to ignore the warning signs.
The new study claims that Massachusetts’ 2022 surtax on millionaires has produced a windfall of new revenue — without scaring away the wealthy. According to the report, higher taxes have coincided with an increase in the number of millionaires and a surge in overall wealth.
It sounds like a fairy tale. Unfortunately, it’s one painted with numbers that don’t hold up under scrutiny. IPS gets it so wrong because it:
1. Conflates Income and Wealth
The report blurs the line between income and wealth — two very different things. Income is taxed annually; wealth often is not. High-income earners are the group most affected by a surtax. By contrast, individuals who own significant assets but generate little taxable income (such as retirees with large investment portfolios) largely avoid the new tax’s bite. Treating them as one and the same misrepresents who is actually impacted by the policy.
2. Ignores Home Sale “Lock-In” Effects
The authors also overlook how Massachusetts’ booming housing market traps many longtime homeowners. Selling a house at today’s prices can easily trigger a one-time income spike, subjecting middle- and upper-middle-class families to the surtax. Many are likely avoiding sales — a lock-in effect that quietly damages economic mobility without showing up in short-term migration statistics.
3. Ignores Broader IRS and Census Migration Data
While the report focuses narrowly on the number of millionaires still in Massachusetts, broader data tells another story. IRS and Census Bureau figures show the state is losing wealthy residents, particularly to lower-tax destinations like Florida and New Hampshire. Losing high-earning taxpayers weakens the state’s long-term fiscal base — even if short-term collections look healthy.
4. Misattributes Wealth Growth
Massachusetts millionaires didn’t get richer because of the surtax. They got richer because of broader national trends: a surging stock market, skyrocketing home prices, and inflationary asset appreciation. These forces lifted wealth across the country, in states with and without new taxes. Claiming that a surtax caused wealth growth turns basic economic reality on its head.
5. Uses Gross, Not Net, Measures
The report cites the growing number of millionaires as proof that Massachusetts remains attractive. But gross numbers tell only half the story. How many high earners have left? How many new millionaires are simply “paper” millionaires whose homes appreciated? Without examining net changes and taxpayer income levels, the claim is meaningless.
6. Pushes a False Narrative About Revenues Exceeding Expectations
The study repeats the talking point that surtax revenues “exceeded expectations.”
Back in 2016, the Massachusetts Department of Revenue projected that a similar tax could bring in about $2 billion annually — before factoring in years of asset inflation and rising incomes. Later projections, such as those from Tufts University, understated likely collections. The result: today’s revenues look impressive only because the bar was set artificially low. Compared to the original, realistic benchmarks, revenue is actually underperforming.
7. No Control Group Comparison
Finally, the study offers no comparison to control states. Many states without surtaxes — such as Florida and Texas — have seen even larger wealth gains. Without a proper control group, the study cannot credibly claim that the surtax helped grow Massachusetts’ wealth base.
A Misleading Picture
The Institute for Policy Studies study offers a rosy view of surtax impacts, but its arguments don’t withstand even modest scrutiny. Conflating income and wealth, ignoring migration trends, misreading broader economic forces, and misstating revenue expectations make for a comforting narrative — but not an honest one.
If Massachusetts policymakers want to ensure a strong, competitive economy, they need to look past carefully curated headlines and examine the real, longer-term risks posed by policies that undercut the Commonwealth’s competitiveness.
