Massachusetts’ New Millionaire Tax Is Doing Better Than Expected
Massachusetts, the former colony that hated taxes so much it led the rebellion against England, has a new state tax that shows just what’s possible when the wealthy are made to pay their fair share. The Boston Globe reported this week that the Fair Share Amendment, also known as the “millionaires’ tax,” had exceeded the amount it was projected to raise for the current fiscal year — by a lot. State lawmakers had budgeted $1 billion in spending from the new revenue. As of Monday, the 4% surtax on annual income over $1 million had raised $1.8 billion, and there are another two months to go before the fiscal year ends.
For those of you who aren’t great at math, the numbers mean there’s already an $800 million surplus from the first year of the tax alone. Lawmakers stipulated that the surplus be put aside in a specified reserve account that can be used for one-time investments into initiatives that may include education programs and new transportation projects. It’s a smart idea, not only to help silence critics who predicted the money would be blown immediately on shortsighted schemes, but also to guarantee that the new funding stream is sustainable before it’s relied on too heavily.
The early success of the new tax — which voters approved in a 2022 ballot initiative — is heartening for people who think the wealthy should help their communities prosper. But there’ve been few opportunities to show what happens when the wealthy are taxed more given the conservative fetish for cutting taxes on the rich over the last few decades. Starting in 2018, for the first time in the country’s history, billionaires paid a lower effective tax rate than working-class Americans.
Not only did the massive tax cuts lead to calls to cut government services, that lack of revenue has helped blow a big hole in the federal deficit and expanded the total debt the U.S. owes. That, in turn, has prompted demands for more budget cuts from Republicans who only seem to remember they dislike deficits when a Democrat is in the White House. President Joe Biden has pledged instead to focus on bringing more money into the Treasury, in part by raising taxes on businesses and imposing a 25% minimum income tax on billionaires. As you can imagine, none of those plans has exactly gone over well with Republicans who want to see former President Donald Trump keep the gravy train rolling for the rich.
But the few steps that Biden has managed put into place to get the wealthy to pay up are already paying dividends. The IRS announced earlier this year that it had collected more than half a billion dollars in back taxes from millionaires, thanks in large part to increased capability that a boost in funding has provided. More are scrambling to get their financial houses in order as the odds of being audited are higher, with the newly muscular agency starting to warn wealthy individuals who haven’t filed their returns to pay up.
There are still some doubters when it comes to Massachusetts’ new millionaires tax. A major concern is that it will further drive people and businesses out of the state, ironically reducing the total tax base the Legislature can draw on. But the idea that there’s some low-tax haven waiting for them elsewhere is a myth that has hasn’t held up well lately. Newcomers to supposed tax havens such as Texas, where income taxes are nonexistent, or Montana, where they’re low, are discovering that those states instead draw revenue on the thing they have in abundance: land. Property taxes are high and getting higher as more people move there and drive up the values of their neighbors’ homes as well, but get very few services provided in return.
Considering that disparity between the libertarian low-tax fantasy and the reality on display, it’s my hope that Massachusetts’ people-driven win serves as a model for what’s possible at the federal level. Crucially, the 2017 Trump tax cuts expire at the end of 2025. The Congressional Budget Office has projected that extending the full package would increase annual deficits beyond baseline projections by $3 trillion over the next 10 years. That’s a mind-boggling amount of money, most of which would be going into the pockets of the wealthy rather than being invested in programs to help the vast majority of Americans.
Biden has indicated that he wants to keep the reduced income tax rates, the costliest part of the package, but only for those making less than $400,000 per year, using the revenue to offset the cuts for the middle and working class. But that’s only going to happen if Democrats hold the White House and both chambers of Congress next year. I can only hope that the Biden campaign and other Democrats put Massachusetts front and center in the messaging and let Americans know that society benefits when millionaires and billionaires aren’t allowed to keep selfishly hoarding their wealth.
Hayes Brown is a writer and editor for MSNBC Daily, where he helps frame the news of the day for readers. He was previously at BuzzFeed News and holds a degree in international relations from Michigan State University.