A new study from the Pioneer Institute says the so-called “millionaires tax” that’s regularly discussed on Beacon Hill wouldn’t just dip into the pockets of the wealthiest few, but would also nail middle-class people cashing out for retirement.
“Despite its purported goal of taxing only the uber-rich, the graduated income tax would fail to protect people of more modest means from overtaxation on one-time windfalls,” wrote study authors Greg Sullivan and Andrew Mikula. “It has the ability to push those with significant capital gains and valuable asset sales into higher tax brackets, punishing owners of retirement nest eggs and desirable real estate. In practice, these ‘one-time millionaires,’ who cash in on a lifetime of work and sacrifice in anticipation of retirement, out-number those who consistently have seven-figure salaries or stock market windfalls.”
The proposal — dubbed the “millionaires tax” or the “fair share amendment” — would slap an additional 4% tax on annual income over $1 million. The Massachusetts Supreme Judicial Court in 2018 threw out a move to get the measure on the ballot for a referendum, but the proponents have kept at it, and the Legislature is expected to vote in the coming months on whether to put it on the ballot in 2022.
Pioneer, which tends fiscally conservative and favors smaller government, said in the report that there would be unintended consequences from the tax. For one, it could come down heavily on people looking to sell property or a business and retire. The report also posited that it could hinder economic recovery efforts by discouraging investment, and it could chase seniors out of the state.
“This surtax would devastate the retirement plans of many Massachusetts residents,” said Pioneer Institute Executive Director Jim Stergios. “Proponents of the tax haven’t thought about the incentive it creates to change one’s domicile to low- or no-tax states as Massachusetts residents approach retirement, nor the deterrent it would create to investment.”
Advocates for the measure say this would require the wealthiest few to pay their “fair share,” and that this move could then provide funding for various state programs.
“It funds what we’ve been dramatically underfunding for years: education and transportation,” said state Rep. Lindsay Sabadosa, a Northampton Democrat who’s in favor of the measure. “We’re not just doing taxes for taxes’ sake.”
And she said of Pioneer’s concerns about retirees being hit, “This is not most people by any stretch of the imagination.”