In this Commonwealth of haves and have-nots, throngs of millionaires inconspicuously live among us. Massachusetts had about 18,000 residents whose annual income was more than $1 million in 2017.
That’s wealth accumulated through windfalls generated by innovations in biotech, startups scaling to maturity, venture capital partners deploying capital, and full-fledged technology companies churning out cash and stock options — all part of an ecosystem that derives from and feeds off of the state’s research universities and other leading institutions. Wealth also abounds from our world-class financial services firms. Then there are the corollary services — real estate developers and law firm partners — and less flashy wealth in manufacturing firms and family-owned businesses you’ve never heard of that quietly earn millions.
Massachusetts is rich beyond most folks’ comprehension. So why, with all the abundance, is there heavy resistance to a simple concept that those who earn a lot more should pay a little bit more proportionally in state taxes?
That’s the fundamental concept behind the so-called millionaires tax, an initiative likely to reemerge and make it to the ballot in the 2022 election. It is a surtax on incomes exceeding $1 million: Any extra dollar earned beyond $1 million would be taxed at an additional 4 percent — in effect 9 cents on that extra dollar when the state’s 5 percent tax rate is added.
If you’re less fortunate, you could muddle through making only $999,000 in a year and still be taxed at the 5 percent state rate.
Having the very rich pay a higher percentage in income taxes than the poor, working, and middle class isn’t exactly a radical concept. It’s what happens every year with federal taxes. And many states have graduated rates that rise as income increases.
Massachusetts’ flat income tax — which is baked into the state Constitution — actually translates into lower-income residents paying more as a proportion of their income than the rich. The state’s wealth leaves us with one of the widest gaps between the rich and poor in the nation, the latter now coming out of the coronavirus pandemic in far worse shape than going in. Extra revenue could pay for improved public transportation, reduced state college tuition and fees, and extra support for struggling school systems, to name a few.
The first millionaires tax effort, called the Fair Share Amendment, was struck from the ballot in 2018 because it stipulated — unconstitutionally, as it turned out — where the anticipated taxes would be directed. But the process to get it on the ballot in 2022 is in motion.
“Working families here in the Commonwealth are tapped out, with the high cost of housing, health care, transportation, child care, and other day-to-day expenses,” said state Senator Jason Lewis at a virtual event about the Fair Share Amendment held in early May by supporters of the tax. Lewis is a cosponsor of the proposal in the Legislature. Advocates believe that if state lawmakers initiate the fair share constitutional amendment this time, it might circumvent the legal issue that struck down the earlier effort.
Critics are already launching their attacks. We’re told the extra taxes might scare away the rich. They could go to Florida, for example, which has no state income tax. But other states with similar millionaires taxes are doing just fine. An exodus of millionaires is an oversimplification; in reality, the decision to move involves other factors, such as family and community ties. It’s why some millionaires in New Jersey, where the tax was approved recently, are staying put. And California, for one, is sporting a massive budget surplus.
And we’re told we don’t need the revenue, given the COVID-19 federal stimulus dollars raining down on us. That is, of course, short-term thinking. The extra $1 billion-plus that the millionaires tax would generate would continue long after the stimulus money has been spent. There is, of course, the long shadow of the “Taxachusetts” moniker and the idea that raising taxes is an immoral idea that would render the state uncompetitive for businesses. But the facts show that Massachusetts taxes on businesses fall in the middle range.
Those who have been blessed with financial success at a level that most of us can only dream of ought to pay more for the common good so that many more people would have more opportunities. It’s why a MassINC December poll found overwhelming support — 72 percent — for the Fair Share Amendment among voters. In a post-pandemic era when disparities between the fortunate and the less fortunate are widening, a surtax on the wealthy makes perfect sense.