Bay State’s golden geese

Two recent studies take a deep dive into the impact of state taxes, particularly those aimed at highincome earners, and their ability to pick up stakes and move to more hospitable locations.

Add in the impact of the recently-passed federal tax reform bill that severely limits the ability of taxpayers to deduct state and local taxes on their federal returns and you have what the Pioneer Institute, author of one of those studies, calls an “economic time bomb” for the state.

Pioneer and the Massachusetts Taxpayers Foundation in its report were both troubled by the possibility of a 4 percent surtax on those earning $1 million or more — which could be on the November ballot — sending those high earners fleeing to the waiting arms of low-tax states like Florida and New Hampshire.

The ballot question is now before the Supreme Judicial Court on the issue of whether the surtax can be combined with an effort to designate the additional funds for education and transportation — a sweetener, if you will, for voters. But there is, in any case, the prospect of the surtax itself reaching the ballot.

Should it pass, high-income earners would face a tax of 9.1 percent, among the highest in the nation (fifth by actual rate, but the other four states offer more deductions). Pioneer found that a taxpayer with an adjusted gross income of $1 million would — because of the new federal limits on deductibility of state taxes —pay more than double the effective state tax rate. Thus increasing his tax bill from $153,152 to $318,095.

Mass. Taxpayers agrees, noting “Massachusetts already has a migration problem.” A net 475,000 people ($18.9 billion in adjusted gross income) left the state from 1993 to 2016. “The additional 4 percent income surtax will surely drive more Massachusetts taxpayers to change their state of tax residency.”

They point to four states that have enacted a surtax on incomes over $1 million — California, Connecticut, New Jersey and New York, which lost a combined $17.1 billion in adjusted gross income in 2016 alone. Their report also noted, “All four states are now rethinking their income tax policies in order to prevent further out-migration by their highest earners.”

Class warfare eventually has its consequences. Massachusetts can’t afford to go down that road.