Millionaires Tax Is Unwise and Unworthy
It doesn’t make society more prosperous or productive when politicians rail against “millionaires” and populists scapegoat the “1 percent.”
On the Massachusetts ballot this November will be another attempt by progressive activists to get voters to agree to something they have repeatedly rejected. The proposed “Fair Share Amendment” would rewrite the Commonwealth’s constitution, which for 106 years has decreed that income may be taxed only at a uniform rate. If voters agree, Article 44 of the constitution would be changed to allow Beacon Hill to impose a surtax of 4 percentage points on any income above $1 million. That would raise the marginal tax rate on million-dollar earners from 5 percent to 9 percent — a whopping 80 percent increase.
For at least three reasons, this is a terrible proposal.
First, it would punish taxpayers who are not millionaires by any normal understanding of the word. As the Pioneer Institute, a leading Boston think tank, warns, the surtax would take a painful bite mostly out of senior citizens selling a home they’ve outgrown or small business owners whose companies’ income is reported on their individual tax returns. These aren’t plutocrats living high on the hog but middle-class residents whose “million-dollar” income is either a one-time anomaly or a mere accounting convenience.
Second, it would accelerate the exodus that has been draining people from Massachusetts for years. The Bay State is already one of the top 10 states that Americans are likeliest to leave. Those who depart relocate to two states in particular: Florida and New Hampshire. What do they have that Massachusetts doesn’t? One feature stands out: Neither taxes income. Between 2010 and 2020, the amount of annual income moving from Massachusetts to other states increased from $422 million to $2.6 billion. Impose a surtax that makes Massachusetts even more unfriendly to business and property owners, and that outmigration will only intensify.
Third, state government has more money at its disposal than it has ever had before. It is inundated with cash it cannot figure out how to spend. The Legislature just passed a gigantic $53 billion budget for the next fiscal year, but a $3.6 billion surplus remains from the fiscal year that just ended. If Massachusetts were desperately short of funds needed to keep afloat, there might be a case for raising taxes. But to do so when revenue is gushing in? If there were a Guinness World Record for fiscal recklessness, the “millionaire’s tax” would be a shoo-in.
Those clamoring for this surtax insist they aren’t motivated by greed or envy. Their sole motivation, they say, is that the wealthy don’t pay their “fair share.” But the data tell a different story. Taxpayers making $1 million and up earn 22 percent of all income in Massachusetts. They pay 24 percent of all income taxes. According to the Department of Revenue, they account for just one-half of 1 percent of the state’s 3.95 million tax filers. Yet they supply nearly a quarter of all income taxes paid.
It’s true that higher-income people pay a lower share of their income in total state and local taxes than do those at the bottom of the income ladder. But that has nothing to do with income taxes and everything to do with sales and property taxes. If Democrats and progressives truly wanted to ease the tax burden of the non-wealthy, they could do so without tearing up a venerable article of the state constitution. They could, for example, follow the lead of New Hampshire and other states that charge no sales tax.
But the purpose of the “Fair Share Amendment” isn’t to ease anything for anybody. It is to whip up resentment against the tiny sliver of the state’s population that reports more than $1 million in income.
The latest publicity release from the left-wing Massachusetts Budget and Policy Center, a key surtax advocate, is headlined: “More than 99% of Mass. Residents Won’t Pay a Penny Toward ‘Fair Share’ Taxes.” An accompanying flyer emphasizes that even in the most highly-paid professions, the average yearly income is less than $1 million. “Relatively few taxpayers,” it assures voters, “would be subject to a tax increase under the Fair Share Amendment.” In other words: Vote for this tax because someone else will be paying.
That is an ignoble sentiment, one of the oldest and most destructive in history. It doesn’t make society more prosperous or productive when politicians rail against “millionaires” and populists scapegoat the “1 percent.” It makes communal life more precarious. The framers of the Massachusetts Constitution knew what they were doing when they embedded a buffer against class warfare into the state’s basic charter. Five times Massachusetts voters have been asked to tear up Article 44 — in 1962, 1968, 1972, 1976, and 1994 — and five times they have said no. They’ll need to say no once again this fall.
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