Maskachusetts has been prevented by its constitution from imposing California-style progressive tax rates to fund its Progressive government goals. That could change in November if voters approve an amendment that would enable forcing the rich to pay their fair share.
Currently, Massachusetts is ranked among the top 15 states in percentage of residents’ income taken to fund state and local government (Tax Foundation). TX runs state/local gov. on 8.6% of what its residents earn. FL takes 9.1%. MA takes 11.5%. The champions include NY at 15.9% and CA at 13.5%. Government by Science (philosopher kings) is not cheap, apparently.
The Pioneer Institute provides some analysis:
The amendment to the Massachusetts Constitution would have a particularly significant impact on retirees and small businesses. It would affect a long list of “income” categories, including salary, capital gains (on the sale of investments, homes, businesses and other assets), dividends, IRA and 401K distributions, interest, royalties, and commissions. In any one year, should the totality of these income streams exceed $1 million, the state would increase existing income taxes by 4 percent on the excess.
“Pass-through” companies such as partnerships, limited liability corporations, subchapter S corporations and sole proprietorships are taxed via individual returns. These mostly small businesses, nearly two thirds of which are subchapter S corporations, employed almost half of all private, for-profit employees in Massachusetts in 2019.
Passage of the constitutional amendment would force many pass-through businesses to pay the new 4 percent tax on top of the existing 5 percent income tax. Subchapter S corporations, which currently pay Massachusetts’ unique “stinger tax” of up to 3.9 percent, would face a total state tax burden of up to 12.9 percent, a rate higher than large corporations pay.
In addition, adopting the tax hike amendment would give Massachusetts the nation’s highest short-term capital gains tax (16 percent) and the highest long-term capital gains tax in New England.
… the tax hike amendment falls primarily on households selling a family home or business to finance retirement. Nearly half of all parties affected by the tax earn $1 million or more only once in a decade; over 60 percent do so only twice.
The tax would apply to more residents every year. To adjust for inflation, the tax amendment uses the Chained Consumer Price Index for All Urban Consumers, which has lagged well behind household income and wages in Massachusetts. State legislative salaries, on the other hand, are tied to median household income, which has risen much faster.
I’m not sure that the tax increase would be a bad idea. Due to the state’s 5% income tax and 16% estate tax, a successful person could already save $millions for his/her/zir/their children by moving to the vacation playground of Florida (see analysis below; kids will enjoy roughly 42 percent higher spending power if the parent moves 30 years prior to dying). We can therefore infer that most people who have chosen to stay in Maskachusetts don’t mind paying higher tax rates.
- Effect on children’s wealth when parents move to Florida (same analysis would apply to Texas or Tennessee or any other state with no state income tax and no estate tax)