Global Tax Insights
The ‘Millionaire’s Tax’ Scheduled to Appear on MA’s November BallotMay 07, 2018
MA households with incomes exceeding $1,000,000 could be subject to something called the “Millionaire’s Tax” in 2019. Its final step is a vote in November, which many are harshly opposing.
The Massachusetts Legislature proposed a “Fair share Amendment” back in 2016, which opponents quickly dubbed the “millionaire’s tax”. Why this nickname? Well, if adopted, the constitutional amendment will tack a 4% surtax on all taxable income above $1,000,000 for Massachusetts residents. The proposal heads to MA’s 2018 state election in November.
Check out our blog, ‘Millionaire’s Tax’ Proposed in Massachusetts which covers the basics of the tax, and details how amendments work in MA.
What happens in November?
November 6, 2018 is Massachusetts’ 2018 state election, and amendments including the ‘Millionaire’s Tax’ will be voted on at this time.
If the vote passes in favor of the tax, the amendment could become law as early as January 1, 2019 and the tax rate on income over $1,000,000 generally would increase to 9.1% (from 5.1), but the tax rate on Short-Term Capital Gains could increase from 12 to 16%.
What are supporters saying about it?
Supporters say the proposed tax will generate income that the state needs. It is estimated that the tax could bring in approximately $1.9 billion each year, which will only be spent on quality public education, affordable public colleges, repair and maintenance of roads, bridges, and public transportation.
Opponents say it will place an unfair burden on the state’s successful residents, and put a damper on MA’s entire business community’s success. Critics also say that the tax would drive away jobs and put pressure on wealthy MA residents to move to a lower tax location.
A number of Massachusetts business groups including The Massachusetts Taxpayers Foundation, Associated Industries of Massachusetts, the Massachusetts Competitive Partnership and the state chapter of National Federation of Independent Business have joined together to have their case heard by the Supreme Judicial Court.
The argument is that the amendment is “unconstitutional” because it seeks to earmark tax money to specific causes. Article 48 of the Massachusetts Constitution prohibits ballot questions from making specific state appropriation, or from combining unrelated topics into a single question. This ballot question would appear to run afoul of the state constitution in its allocation of tax dollars specifically for education. Opponents also argue it will handcuff legislators on how to spend the tax dollars generated.
At this point it is unclear how the court will rule. A decision is expected by late Spring.
We will keep you updated on the tax and its possible passage. Questions? Contact a member of our Private Client Services Team for more info.