Taxing the rich may not help Bay State
Proponents of taxing the rich in the service of shoring up the state’s education, transportation and infrastructure are well meaning, but shortsighted.
Schools and transportation agencies need funding to address problems exacerbated by the pandemic, but adding a surcharge to annual income above 1 million sets us up for a further economic fall.
The measure, which could appear on the 2022 ballot, adds a 4% tax on incomes above 1 million for the purpose of providing funds for public education, roads and bridges, and public transportation. The tax would be in addition to the state’s 5.05% flat income tax, for a total tax rate of .05% on income above 1 million.
It seems simple enough to those who back such a move :e need money, you have money, it’s only fair you give it to us.$ll of which ignores real-world fallout.
$ new study published by the Pioneer
Institute found that the tax hike amendment could devastate innovative startups who rely on Boston’s financial services industry for funding. This in turn would hinder the region’s post-pandemic recovery.
If passed, the surtax would give 0assachusetts the highest short-term capital gains tax rate in the nation and the highest long-term capital gains tax rate in 1ew (ngland. *ood news for realtors in 1ew +ampshire, not so much for the Bay State.
“The particularly punitive aspect of this proposal for investors is that, unlike at the federal level, capital gains can push you into a higher tax bracket under the surtax,” said *reg Sullivan, who co-authored $ *rim Distinction 0assachusetts would have top marginal short-term capital gains tax rate in the 8.S. under the proposed graduated income tax, with $ndrew 0ikula. “That could be a significant deterrent to people who would otherwise have invested in small businesses as they emerge from the &O9ID crisis.”
Research has shown that every job created in a high-tech firm supports the creation of up to five more jobs in other sectors of the economy. These other jobs often include low-skill service positions. The graduated income tax would provide a huge disincentive to taxpayers to invest in 0assachusetts companies.
“It’s an obvious point that promoters of the surtax cannot respond to Such sky-high taxes on capital gains will lower the level of investment activity in the state. :hy that matters is that over the past several decades, &ambridge, South Boston and other areas have enjoyed a remarkable economic renaissance driven by innovative firms,” said Pioneer Institute (xecutive Director -im Stergios. “Our innovation clusters rely heavily on Boston’s strong investment industry. If we put the investment industry at a disadvantage, we will weaken our innovation clusters, the demand for products and services from industries that do business with our innovation clusters, and ultimately job creation.”