New Report Analyzes Massachusetts’ Proposed Millionaires Tax

Center for State Policy Analysis at Tufts University's Tisch College describes how the November 2022 ballot question would affect state revenues and public investments, predicts how high-earners might respond

A report released today by the Center for State Policy Analysis (cSPA) at Tufts University's Tisch College examines the coming millionaires tax ballot question that would support education, transit and transportation spending with a 4 percent surtax on earnings over $1 million.

According to cSPA, a millionaires tax could generate substantial revenue of approximately $1.3 billion in 2023, even accounting for potential behavioral changes.

At the same time, the report indicated that the proposed tax has the potential to drive some millionaire-earners out of state and could spur tax avoidance.

The new cSPA research finds that:

- While only 0.6 percent of Massachusetts households earn over $1 million in a given year, they collect over one-fifth of all income in the state (22%). A targeted tax on these households could be a highly progressive way to address economic inequities.

- Some millionaires may relocate to other states in response to the millionaires tax, but the number of movers is likely to be small.

- Tax avoidance could cut substantially into the amount of revenue raised by the proposed tax.

- Together, cross-border moves and tax avoidance would reduce expected revenues from the proposed tax by roughly 35 percent. Absent these responses, the tax would be expected to raise $2.1 billion in 2023.

- Any short-term impact on the Massachusetts economy is likely to be negligible. The long-term economic effect depends on whether the state durably increases the size of transit and education-related investments or uses this money to support already-planned spending.

Read the full report here.

“This is an important and complicated issue for voters to consider,” said Evan Horowitz, executive director of cSPA. "We wanted to provide a non-partisan assessment of the benefits and potential risks to support and inform the debate.”

“Increasing the progressivity of the state's tax system and providing more resources for education and transportation are both worthy goals,” noted Thomas Downes, associate professor of economics in Tufts’ School of Arts and Sciences and lead researcher on this cSPA report. “However, those goals cannot be accomplished without inducing behavioral changes, the magnitude of which are poorly understood. This brief draws on the experience of other states and countries to document the implications of those behavioral changes for the revenue the millionaires tax could generate.”

cSPA provides expert, nonpartisan analysis of legislative proposals and ballot questions in Massachusetts. It is governed by Tufts University and guided by a bipartisan advisory group. cSPA is supported by Tisch College along with a diverse group of funding sources from across the political spectrum. These funders have no involvement in cSPA's research.

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