Economist: Massachusetts’ Fair Share Amendment ‘gift to other states’
(The Center Square) – The controversial ‘Millionaires Tax’ is drawing criticism from some of the state’s top think tanks.
In a recent Boston Herald op-ed, Charles Chieppo, a senior fellow at the Boston-based Pioneer Institute, posited the proposed state amendment would help drive business and population into the welcoming arms of tax friendlier states like New Hampshire and Florida.
Also known as the “Fair Share Amendment,” the tax hike is slated to appear on Bay State ballots in November. Voters will decide whether to raise taxes on income above $1 million by 4%. Revenues from the tax, projected to be near $2 million, are intended to go toward the state’s transportation and educational needs.
Echoing Chieppo’s argument, American Institute for Economic Research economist Pete Earle said this may raise revenue in the short term, but the long-term effects will be detrimental.
“Over the longer term it will likely exacerbate the slow but steady movement out of the state towards Texas, Tennessee, Florida, Nevada and other states that Massachusetts, New York, New Jersey, Connecticut, and other northeastern states (and California) are seeing,” he told The Center Square. “In the short term, it will probably boost revenue. Over a longer time period, it’s a gift to other states.”
Chieppo pointed out that Massachusetts ranks 49th for the highest cost of doing business in the nation, according to the Tax Foundation. During the pandemic, Americans have figured out they don’t have to sit in an office in a particular state to do their job, he added.
“Costs matter,” he wrote in the Boston Herald. “And the dawn of an era in which more people than we ever imagined can look out the window of their bucolic Vermont farmhouse while working for a Cambridge biotech firm is hardly the time to make Massachusetts an even more expensive place in which to live and do business.”
Both Chieppo and Earle agree that such a hike won’t necessarily lead to the windfall of revenues proponents assert will flow in.
“It is likely (as is usually the case with these types of tax amendments), that there will be a statistically significant increase in taxable income falling to between $950K and $999K among households that formerly saw annual incomes in excess of $1 million,” Earle said.
Connecticut serves as a cautionary tale, according to Chieppo.
“After yet another income tax hike in 2015, the amount paid by Connecticut’s 100 largest taxpayers dropped by a stunning 45% the following year,” he wrote. “It’s awfully hard for states to collect taxes from individuals and employers who have left.”
If proponents are looking at this amendment as an attempt toward equalizing the increased disparity between the high- and low-income earners that the pandemic saw, they are looking in the wrong direction, Earle said.
“It’s interesting to see the egalitarian spin on these initiatives when a major reason why, frankly, the rich got so much richer over the last two years owe directly to non-pharmaceutical policy responses to the pandemic,” he said.
Government policy forced individuals working jobs that typically bring in less to go home and closed small businesses, he added.
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