A millionaire levy in Massachusetts that New York Metropolis mayoral frontrunner Zohran Mamdani holds up as a mannequin for taxing the wealthy has generated $3 billion extra in income than anticipated with out forcing vital high-profile departures from the state.
Within the two years because the state began charging a 4% surtax on incomes over $1 million, the hassle has created a $5.7 billion windfall, with the excess getting used to fund bridge repairs, bolster literacy packages and handle the transportation system’s funds deficit.
Whereas different states have progressive tax brackets, the Massachusetts legislation stands out structurally in its focusing on of incomes that exceed seven figures. That has infuriated enterprise leaders who complain it makes the state much less aggressive and drives away the rich. A number of are even backing poll proposals to decrease the state earnings levy and restrict how a lot tax income could be collected in any given yr as a solution to diffuse the millionaire’s payment.
Some high-profile names have moved away, together with Robert Reynolds, the previous chief govt officer of Putnam Investments. However different anecdotes of bold-faced names or firms ditching Massachusetts are tougher to come back by, in distinction to tales of exits from New York, Chicago and San Francisco. Which will change as extra Inside Income Service information is launched within the coming months, probably bolstering the case for the tax or offering proof of the way it can undermine a state’s enchantment to the rich.
Boston Mayor Michelle Wu — whom Mamdani has referred to as a job mannequin — lately chastised executives for complaining concerning the tax. She contends that the area’s expertise pool and livability are extra vital to its financial competitiveness.
Many high-income taxpayers are staying within the Boston space regardless of the tax hike.
“On the finish of the day, I occur to imagine it’s an exceptional place to reside,” mentioned Sam Slater, an actual property developer who lives within the Boston suburb of Weston and pays the millionaire’s tax.
Slater, 41, might reside wherever: His actual property agency has holdings nationwide. He travels regularly for his facet job producing movies starring large names like Mark Wahlberg. His holdings together with a bit of the Nationwide Hockey League’s Seattle Kraken. He even spent a part of his childhood in West Palm Seashore, Florida, a favourite refuge for rich executives seeking to flee excessive taxes and winters.
However he’s staying put. His household has roots within the area, and so they additionally like Boston’s tradition, sports activities groups and seasons, Slater mentioned.
Josh Isner, president of taser producer Axon Enterprise Inc., mentioned the millionaire’s tax makes it tougher to recruit expertise — significantly well-paid artificial intelligence specialists — to the Northeast hub the corporate opened in Boston final yr. However the workplace relies within the metropolis as a result of “Boston breeds super-talented individuals,” he mentioned earlier this yr.
He lives in Massachusetts, quite than close to the corporate’s headquarters in Scottsdale, Arizona, the place earnings taxes are considerably decrease. That’s largely as a result of Massachusetts faculties are so famend, he mentioned.
Massachusetts voters approved the surtax in 2022, with the levy making use of to earnings that exceeds the $1 million threshold. Mamdani, who has maintained a big lead in polls forward of New York’s Nov. 4 mayoral election, cited the Massachusetts coverage as a hit story when he floated his personal millionaire’s tax proposal.
New York might show totally different than Massachusetts. The Empire State already ranks dead last within the Tax Basis’s competitiveness index with charges which can be among the many highest within the nation. And whereas Mamdani has used billionaires as a foil in his marketing campaign — he needs to lift levies on people and companies to pay for his progressive agenda — Governor Kathy Hochul has dominated out approving will increase.
In Massachusetts, with a buoyant inventory market serving to to swell rich residents’ taxable wealth, the millionaire’s tax generated an estimated $3 billion within the fiscal yr that ended June 30, greater than double what state lawmakers had budgeted, based on the Massachusetts Division of Income. Collections a yr earlier equally exceeded expectations. The surtax has generated $5.7 billion in complete.
The additional money has helped Governor Maura Healey ease the Massachusetts Bay Transportation Authority’s funds hole at a time when different states are slashing practice and bus service. Healey’s now in search of to use $200 million of the cash to deal with President Donald Trump’s cuts to analysis funding at Massachusetts establishments, one of many largest threats to the state’s financial system. The legislation that created the tax requires the funds to go towards schooling and transportation initiatives.
“Individuals who thought this tax would backfire must concede now that it generates a considerable quantity of extra income,” mentioned Evan Horowitz, govt director of Tufts College’s Middle for State Coverage Evaluation. Nonetheless, he estimates that for each greenback the millionaire’s tax brings in, the state is more likely to lose 20 to 50 cents in earnings taxes from those that go away or undertake tax-avoidance methods. These oblique losses are arduous to pinpoint, he mentioned.
People with incomes over $1 million have been answerable for 35% of complete funds in Massachusetts in 2022, the yr earlier than the millionaire’s tax took impact and the newest interval for which IRS data is on the market.
Some high-profile executives have certainly decamped for lower-tax states due to the surcharge. Reynolds, the previous Putnam Investments CEO, cited the mixture of the millionaire’s tax and the Massachusetts property tax. He moved to Florida final yr, shortly after Franklin Templeton acquired Boston-based Putnam.
The surtax “pushes you to make an earlier determination,” Reynolds mentioned. The 73-year-old finance govt has been a fixture in Boston enterprise circles for many years, having constructed Constancy Investments’ 401(ok) enterprise earlier than becoming a member of Putnam in 2008. He stays on the board of the Massachusetts Aggressive Partnership, a group of the state’s strongest executives.
Enterprise leaders proceed to warn that even when rich residents didn’t abandon the state in droves within the tax’s first years, the departures will add up over time — and finally harm Massachusetts greater than it helps. They level out that $1 million incomes don’t go so far as they used to, significantly in a high-cost state like Massachusetts. The median house value within the better Boston space surpassed $1 million in June earlier than falling again beneath that threshold once more.
“I haven’t been to 1 assembly in Boston since this handed the place there haven’t been numerous individuals saying that they’re shifting out of the state,” Reynolds mentioned.
Different high-profile Massachusetts residents who’ve moved are reluctant responsible the tax. Steve Pagliuca, a longtime Bain Capital govt and Boston Celtics co-owner, has said his latest transfer to Florida was on account of household causes and his retirement from day-to-day work at Bain, not the tax. He lately offered to accumulate the Connecticut Solar ladies’s skilled basketball group and relocate it to Boston.
Within the absence of clear information, supporters and critics of the millionaire’s tax alike have touted research that assist their arguments — even when they don’t inform the total story.
A study by a progressive analysis group discovered that the variety of millionaires in Massachusetts jumped by 39% from 2022 to 2024, with the authors concluding the surtax is an efficient coverage instrument. The report’s information measured wealth, nevertheless, not the earnings figures that decide who’s topic to the tax.
A separate survey carried out by a enterprise advocacy group this yr discovered that tax coverage was the most-cited cause for residents’ strikes elsewhere. Few of these surveyed are topic to the millionaire’s tax, although. The outflow of residents to different states additionally predates the surtax and displays different components akin to excessive housing costs.
Slater, the actual property developer, has mates who left Massachusetts for locations like Florida and Texas — each due to the millionaire’s tax and for different causes. Whereas he has no plans to observe them, he’s involved Massachusetts might improve the surcharge or add different taxes sooner or later.
New will increase have been on the desk this yr. Elevate Up Massachusetts, the labor-backed group that proposed the millionaire’s tax, is now pushing to extend state duties on company overseas earnings. Healey additionally proposed new taxes on sweet, prescribed drugs and artificial nicotine merchandise — levies that the state legislature finally rejected.
Ought to Massachusetts tax rich people additional, Slater mentioned he can’t say with certainty he’d stick round.
