Massachusetts contemplates California-style tax rates

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.


16 thoughts on “Massachusetts contemplates California-style tax rates

    • I grew up near in MA adjacent to the NH border. My 30th high school reunion was recently held. More than half of my classmates (as well as many, many family members) have relocated to southern NH over the past three decades.

    • ^… Now, 30 years later, all those MA refugees to NH are relocating to FL.

  1. This is very worrisome for our national competitiveness. Entrepreneurship benefits from network effects and if this tax increase takes place, it will harm the Kendall Square innovation hub.

    • @Anonymous: What innovations are coming from California or NYC except ideas to let illegal immigrants vote in addition to dying en masse? Are they coming up with some new, air-conditioned trucks?

      The biggest innovation I’ve seen recently is being “assembled” in the USA – meaning all the parts are made elsewhere – an automatic cat shit litterbox. Earth-shattering! And that’s in Michigan and employs maybe 300 people.

      What kind of new innovations are NYC and CA people coming up with that I haven’t seen?

    • Alex has a point on biotech. If the tax increases cause the biotechers to disperse there wouldn’t be as much of a network effect. That said, I think there is huge room for tax rate increases in Massachusetts due to the fact that the people who live there generally can’t imagine living anywhere else. Also, there is no zombie army of the unhoused as in San Francisco. So Massachusetts should be able to sustain at least as high a tax rate as California.

    • What kind of new innovations are NYC and CA people coming up with that I haven’t seen?


      The CA people are coming up with all sorts of new tools for state censorship.

      The NY people are inventing new rules for racial equity/baiting.

      Innovation centers, both of ’em!

    • @philg: I respectfully disagree in part, on behalf of the Zombie Army roaming the streets of Worcester.

    • All of the abortion care news is helpful to Massachusetts for retaining taxpayers. The self-described smartest people in the world think that they won’t be able to notice a pregnant person’s pregnancy until he/she/ze/they is 24 weeks along and, therefore, it is necessary to live in a jurisdiction where abortion care on demand is available up to 24 weeks into a pregnant person’s pregnancy (for reference, a baby born at 21 weeks can survive to adulthood). It would be inconceivable to notice a baby bump prior to the 15-week Florida limit and, therefore, moving to Orlando is impossible.

  2. I know there are already people who are contemplating the move, and actually have for a long time. If anything is to be the tipping point, this is. Massachusetts is gradually becoming so confiscatory that even people who have done everything 110% correctly are feeling like the Commonwealth is out to get them. And it’s not going to end well for Massachusetts because there are other, better places to go. It’s sad to leave, but sometimes it has to happen.

    • I had a candid conversation with one of my doctors who performed a major operation on me and he said: “I’ll be here for your next follow up but I don’t know about after that. I really want to retire and leave Massachusetts.” And he left it at that, but I understood. MA will lose a lot of the best people it has if they’re stupid enough to do this.

  3. Got to correct the record… Texas’ rate cited in text is the local + sales tax in most jurisdictions as they don’t have a state income tax.

    The Texas administrative behemoth runs on sales taxes, property taxes and various other use and business taxes and fees instead of state income taxes.

    Sales tax is approx 40% of the nearly $250B in annual revenue. Depending on jurisdiction, property taxes can be quite high approaching 2% per year. Since property taxes are paid against assessed values, those tend to mysteriously go up and up and up each year.

  4. As a guy living in MA with a substantial part of my income coming from short-term capital gains, this tax increase would cause me to move.

  5. This just in from Pravda:

    The Covidcrats told New Yorkers that NYC wasn’t safe and the ones who weren’t living in free taxpayer-funded housing responded by moving out of NYC! Maybe the FBI should be called in to investigate this mystery.

    ———– IRS data

    About one-third of the people who left moved from Manhattan, and had an average income of $214,300. No other large American county had a similar exodus of wealth.

    ———– taxpayers in other states have kept the city going financially

    Still, New York City collected more tax revenue in both 2020 and 2021 than in 2019, thanks in part to at least $16 billion in federal pandemic aid.

    ———– immigration is what has kept the city going for landlords

    Since the 1950s, New York City has had a net loss of residents to other states, but the population still grew because the number of immigrants and new births surpassed the number of people who moved away.

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