global Tax ‘Millionaire’s Tax' Proposed in Massachusetts October 20, 2022 MA households with incomes exceeding $1,000,000 could be subject to something called the “Millionaire’s Tax” in 2023—a tax some are supporting, and others are calling burdensome. Editor’s Note: The Millionaire's Tax has been approved as of November 9, 2022. This November, a Massachusetts referendum for a “Millionaire’s Tax” is on the ballot as Question 1. What does it mean for high-income taxpayers in the Bay State? If the vote passes, what happens? If this happens, the amendment could become law as early as January 1, 2023 and the tax rate on income over $1,000,000 generally would increase to 9% (from 5%), but the tax rate on Short-Term Capital Gains could increase from 12% to 16%. What else would the amendment do? The amendment would.... Restructure the state’s income tax. Though MA has different classes of income, each class only has one rate, but the amendment would transition Massachusetts from a single rate to multiple rates for each class of income. Thus there will be multiple tax brackets for each income class.Affect nearly 20,000 taxpayers and raise about $1.9 billion of additional tax revenue, according to current estimates. The $1 million dollar threshold would then be indexed for inflation, increasing over time. Change how MA tax rates compare to those of other states. There are currently 44 states (including the District of Columbia) with some form of an income tax. Massachusetts’ ordinary income tax rate of 5% is the 25th highest ordinary income tax rate in the U.S. The rate would be the 9th highest if the surtax is added. Restrict use of the funds raised by the new tax rates. Per the amendment, additional revenue from this increase shall only be expended towards “public education and affordable public colleges and universities , and for the repair and maintenance of roads, bridges and public transportation.” What supporters of the amendment have to say... Supporters say that the amendment.... Supports a more progressive mindset. Many believe that the state’s income tax should be more progressive, largely because less affluent households spend more of their money on other taxes that more prosperous households don’t have to worry about. Massachusetts is one of a few states without a progressive, multi-rate income tax structure. Provides new funding for schools and transportation infrastructure. What opponents of the amendment have to say... Opponents argue that.... Massachusetts revenue is already in a revenue surplus. The Commonwealth’s mandated revenue cap was exceeded for the 2021 tax year, and taxpayers will soon be receiving a rebate for an estimated 13% of their 2021 tax liability. High-income households will move to other states to avoid the surtax, increasing taxes on middle-income households in the Commonwealth. Would MA be the only state with a millionaire’s tax? California, New Jersey, New York, and the District of Columbia all have supplemental tax brackets that begin at $1 million or higher and more states have recently considered levying additional taxes on high-income taxpayers. We’ll keep you updated on the tax and its possible passage. Questions? Contact a member of our Private Client Services Team for more info.
