Taxing millionaires is a contentious issue, but Massachusetts is declaring an early victory, with an announcement this week that the state’s tax on the highest earners has raised $1.8 billion in additional revenue. With three months left in the state’s budget year, the proceeds are already $800 million more than what officials, including Gov. Maura Healey, planned to spend on additional revenue from the tax, according to the State House News Service.
The money from the so-called fair-share tax is intended to boost transportation and education, including giving every public school child in the state free lunch, Healey’s office said. Fortune last fall, and while the fate of the surplus funds is not yet clear, it will likely be earmarked for capital projects in education and infrastructure. “These are two areas of tremendous need,” Senate Budget Chief Michael Rodrigues said on the Senate floor, according to the State House News Service.
The tax imposes an additional 4% levy on any income above $1 million a year and was approved by voters in 2022, but was immediately criticized by opponents who warned the tax would drive away high earners. Florida and New Hampshire — two states that do not impose income taxes — have long been favorite destinations for Massachusetts residents looking to escape the state’s tax regime, Bloomberg Tax noted. Now progressive advocates are claiming victory in the aftermath of the Massachusetts election.
“Opponents of the Fair Share Amendment claimed that multimillionaires would flee Massachusetts rather than pay the new tax, and they are being proven wrong every day,” Andrew Farnitano, a spokesman for Raise Up Massachusetts, a group that pushed for the initiative, told me. Boston sphere.
“With this money from the ultra-wealthy, we can do even more to improve our public schools and colleges, invest in roads, bridges and public transportation, and build an economy that works for everyone,” Farnitano continued.
The right-wing Massachusetts Fiscal Alliance denounced the tax. “The short-term financial benefit the state will receive from the income tax will be offset by the negative impact this tax has on the state in the long term,” spokesman Paul Craney told the State House News Service. “It drives away high-income earners and makes the decision very easy for taxpayers who are regularly hit by this tax to move to more tax-friendly states.”
The Tufts University Center for State Policy Analysis released a report in January 2022 finding that the tax would apply to less than 1% of households in Massachusetts in any given year — and that while some high-income residents other states could move, the The number of movers will likely be small.
News of the Massachusetts tax’s success in its first year is fueling progressives in other states. In neighboring New York, the group Invest in Our New York called for a similar tax, writing that the Massachusetts experience “underlines that taxes on the ultra-wealthy are not only politically feasible but also a fiscal necessity.”
This story originally appeared on Fortune.com
