wealth surtax

Drawing on migration patterns between Massachusetts and states like Rhode Island and Tennessee, Pioneer Institute is releasing a study showing a direct correlation between personal income tax rates and household domestic migration patterns between 2004 and 2019. The study suggests that instituting a graduated income tax will shrink the tax base and deter talented workers and innovative employers from coming to and staying in the Bay State.

As voters now begin to weigh the potential impact of a ballot proposal to increase taxes on business owners, retirees and wealthier households, a new literature review by Pioneer Institute shows that many existing academic studies find that wealthy individuals are particularly sensitive to changes in tax policy. Other studies explicitly warn policymakers that behavioral responses to taxing the rich could erode the tax base and ultimately strain state budgets.

A new literature review by Pioneer Institute shows that many existing academic studies find that wealthy individuals are particularly sensitive to changes in tax policy. Other studies explicitly warn policymakers that behavioral responses to taxing the rich could erode the tax base and ultimately strain state budgets. The Pioneer Institute study ties the results of these academic pieces into Massachusetts’ current graduated income tax proposal. 

This is no time to threaten Massachusetts’ prospects for an immediate economic recovery and the long-term competitiveness of the Commonwealth’s businesses. As Massachusetts lawmakers prepare to vote on whether to send a proposed constitutional amendment that would impose a 4 percent surtax on residents who earn $1 million or more in a year to the statewide ballot in 2022, Pioneer Institute urges them to recognize that tax policy sizably impacts business and job location decisions and that jobs are more mobile than ever.

Proponents of a state constitutional amendment to add a 4 percent surtax on all households with annual income above $1 million frequently cite 2015 data from the Institute on Taxation and Economic Policy, which argues that the Massachusetts tax code is regressive, but a new study published by Pioneer Institute debunks many of the underlying assumptions used in ITEP’s 2015 report.

Pioneer Institute's Statement before the Joint Committee on Revenue In Opposition to: HB 86 (Pages 1-4), a legislative amendment to the Constitution to provide resources for education and transportation through an additional tax on incomes in excess of one million dollars.

This policy brief finds that the state constitutional amendment promoted by the Massachusetts Teachers Association and the Service Employees International Union to add a 4 percent surtax to all annual income above $1 million will adversely impact a significant number of pass-through businesses, ultimately slowing the Commonwealth’s economic recovery from COVID-19.

Advocates for a state constitutional amendment that would apply a 4 percent surtax to households with annual earnings of more than $1 million rely heavily on the assumption that these proposed taxes will have little impact on the mobility of high earners. They cite analyses by Cornell University Associate Professor Cristobal Young, which exclude the vast majority of millionaires, according to a new study published by Pioneer Institute.

Advocates of a constitutional amendment that would apply a 4 percent tax on all annual individual income over $1 million argue that similar taxes in other states have had little impact on the migration of millionaires, citing the research of Cornell University Associate Professor Cristobal Young, which suggests that “millionaires’ taxes” enacted in other states similar to the one being proposed in Massachusetts have had little impact on millionaire mobility. This paper demonstrates that he drastically undercounts millionaires, and outlines several ways in which he and tax advocates underestimate the number of people who will at some point in their lives be subject to a so-called millionaire’s tax and tax flight trends.