Taxachusetts revisited

The threat from that socalled millionaire’s tax headed for the Massachusetts ballot is far worse than its proponents have been letting on.

The impact on capital gains taxes — little talked about by those pushing the initiative petition — would have a devastating effect on the state’s economy, according to a new report by the Pioneer Institute.

In fact, it would hike the state’s top marginal rate from its current ranking of 30th in the nation to fourth highest in the nation. Adding state and federal rates would bring Massachusetts from 25th in the nation to second (behind only California) — and the sixth highest in the world.

Now to our way of thinking that’s rather horrifying.

“By imposing a 4 percent income surtax on all annual income over $1 million, including capital gains, Proposition 80 would penalize the capital formation that is the key to longterm growth and higher living standards,” the study authored by Pioneer research director Greg Sullivan noted.

The report also points out that the tax would apply to capital gains from the sale of a principal residence (minus exclusion of $250,000 for a single filer or $500,000 for a married couple) — raising the possibility of creating “accidental millionaires” in today’s hot real estate market.

The state’s Supreme Judicial Court is being asked to take a serious look at the nature of the ballot question itself and whether it indeed constitutes exactly the kind of log-rolling measure that would prohibit it from being considered a proper initiative petition in the first place. (It would dedicate new revenue to education and transportation.)

But barring a court reprieve, this is no time to send the state back to the bad old days of its Taxachusetts roots.