Among the multiple proposals to create or raise Massachusetts taxes is one commonly known as the millionaires tax, a plan to increase the income tax on earnings over $1 million. Already, it promises to be a significant issue in the 2018 gubernatorial race.
Here’s what you need to know:
How would it work?
The proposed constitutional amendment would establish a new 4 percent state income tax on annual taxable income in excess of $1 million. This would be on top of the general state income tax, which is currently set at 5.1 percent. It would apply to all tax years beginning on or after Jan. 1, 2019.
Who would be hit?
Initially, the tax would apply to Massachusetts taxpayers who earned more than $1 million in a given year. But that bar would be adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets. The idea is to make sure the tax always hits the state’s very highest earners.
The state estimates that 19,500 returns would be affected in 2019 — about 0.5 percent of all returns filed.
What would the state do with the revenue?
The state estimates that the new tax would generate up to $2.2 billion in 2019. Proponents — including a coalition of religious, community, and union groups — insist the money will be spent on education and transportation projects.
Who will decide if this becomes law?
The measure has won initial legislative approval and is subject to one more vote on Beacon Hill. If it meets the necessary threshold — just 50 votes — the plan will be put before state voters in November 2018.Felice Belman can be reached at email@example.com.