Millionaire tax that inspired Mamdani fuels $5.7 billion in Massachusetts

In the two years since the state began imposing an additional 4% tax on income exceeding $1 million, these efforts have generated a windfall of $5.7 billion, with the surplus used to fund bridge repairs, support literacy programs and address the transportation system’s budget shortfall.

While other states have progressive tax brackets, the Massachusetts law stands out structurally in its targeting of incomes exceeding seven figures. This has angered business leaders, who complain that it makes the country less competitive and drives away the wealthy. Many of them are equal to support Ballot proposals to lower the state income tax and limit the amount of tax revenue that can be collected in any given year as a means of distributing the millionaire fee.

Some notable names have departed, including Robert Reynolds, former CEO of Putnam Investments. But other tales of bold names or companies leaving Massachusetts are harder to come by than tales of departures from New York, Chicago and San Francisco. That may change as more Internal Revenue Service data comes out in the coming months, which could strengthen the case for the tax or provide evidence of how it could undermine the state’s appeal to the wealthy.

Boston Mayor Michelle Wu — whom Mamdani described as a role model — recently discipline Executives to complain about tax. She stresses that the region’s talent pool and livability are more important to its economic competitiveness.

Many high-income taxpayers reside in the Boston area despite the tax increases.

“At the end of the day, I think it’s a great place to live,” said Sam Slater, a real estate developer who lives in the Boston suburb of Weston and pays the millionaire tax.

Slater, 41, could live anywhere: His real estate company has properties all over the country. He travels a lot for his side job producing films starring big names like Mark Wahlberg. His holdings include part of the NHL’s Seattle Kraken. He even spent part of his childhood in West Palm Beach, Florida, a favorite retreat for wealthy executives looking to escape high taxes and winters.

But it stays in place. Slater said his family has roots in the area and loves Boston’s culture, sports teams and seasons.

Josh Eisner, president of the Taser manufacturer Exxon Corporation Inc., the millionaire tax makes it difficult to hire talent – in particular Well-paid AI specialists – to the Northeast Center that the company opened in Boston last year. But the office is located in the city because “Boston breeds very talented people,” he said earlier this year.

He lives in Massachusetts, not near the company’s headquarters in Scottsdale, Arizona, where income taxes are much lower. This is largely because Massachusetts schools are so popular, he said.

Voters in Massachusetts consent The additional tax in 2022, with the tax applying to income exceeding the $1 million threshold. Mamdani, who maintained a significant lead in the polls ahead of New York’s November 4 mayoral election, pointed to Massachusetts politics as a success story when he was mayor of New York. I posed His millionaire’s tax proposal.

New York may be different from Massachusetts. The Empire State has already been ranked Finally dead In the tax institution competitiveness index, rates are among the highest in the country. While Mamdani has used billionaires as cover in his campaign — he wants to increase fees on individuals and businesses to fund his progressive agenda — Gov. Kathy Hochul has ruled out approving the increases.

In Massachusetts, with a booming stock market helping to swell the taxable wealth of wealthy residents, the millionaire tax generated an estimated $3 billion in the fiscal year ending June 30, more than double what state lawmakers budgeted for, according to the Massachusetts Department of Revenue. Likewise, the previous year’s collections exceeded expectations. The additional tax generated $5.7 billion in total.

The additional money helped Gov. Maura Healey ease the Massachusetts Bay Transportation Authority’s budget gap at a time when other states are experiencing difficulties. Shredder Train and bus service. Hailey is now seeking is used $200 million of that money is to address President Donald Trump’s cuts to research funding at Massachusetts institutions, one of the biggest threats to the state’s economy. The law that created the tax requires funds to be directed toward education and transportation initiatives.

“People who thought this tax would backfire are going to have to concede now because it generates a significant amount of additional revenue,” said Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University. However, he estimates that for every dollar the millionaire’s tax brings in, the state is likely to lose 20 to 50 cents in income taxes from those who leave or adopt tax avoidance strategies. He said it is difficult to quantify those indirect losses.

Individuals with income of more than $1 million were responsible for 35% of total payments in Massachusetts in 2022, the year before the millionaire tax went into effect and the last period in which the I.R.S. Data available.

Some prominent executives have already moved to states where taxes are lower because of the surcharge. Reynolds, the former CEO of Putnam Investments, cited the combination of the millionaire’s tax and estate tax in Massachusetts. He moved to Florida last year, shortly after Franklin Templeton acquired Boston-based Putnam’s company.

The additional tax “forces you to make an early decision,” Reynolds said. The 73-year-old CFO has been a fixture in Boston business circles for decades, building Fidelity Investments’ 401(k) business before joining Putnam in 2008. He remains on the board of the Massachusetts Competitiveness Partnership, a group of the state’s most powerful CEOs.

Business leaders continue to warn that even if wealthy residents do not leave the state in large numbers in the early years of the tax, departures will increase over time — and ultimately hurt Massachusetts more than they help. They point out that a million-dollar income isn’t what it used to be, especially in a high-cost state like Massachusetts. Average home price in the greater Boston area Exceeded $1 million in June before falling back below that limit.

“I haven’t been to a single meeting in Boston since this one ended where there weren’t as many people saying they were moving out of state,” Reynolds said.

Other prominent Massachusetts residents who have moved are reluctant to blame the tax. Steve Pagliuca, longtime Bain Capital executive and co-owner of the Boston Celtics, He said His recent move to Florida was for family reasons and his retirement from his day job at Bain, not because of taxes. It is recently I offered To acquire the Connecticut Sun women’s professional basketball team and move it to Boston.

In the absence of clear data, supporters and critics of the millionaire tax alike have touted studies that support their arguments — even if they don’t tell the whole story.

A He studies A progressive research organization found that the number of millionaires in Massachusetts jumped 39% from 2022 to 2024, and the authors concluded that the additional tax is an effective policy tool. However, the report’s data measures wealth, not income figures that determine who is taxed.

separate reconnaissance A study this year by a business advocacy group found that tax policy was the most cited reason for residents moving elsewhere. However, few of those surveyed are subject to the millionaire’s tax. The influx of population to other states also precedes the additional tax and reflects other factors such as rise Housing costs.

Slater, the real estate developer, has friends who left Massachusetts for places like Florida and Texas, because of the millionaire tax and other reasons. Although he has no plans to pursue it, he is concerned that Massachusetts may increase surcharges or add other taxes in the future.

New increases have been put on the table this year. Raise Up Massachusetts, the labor-backed group that proposed the millionaire’s tax, is now seeking to increase state duties on foreign income for corporations. Hailey too Suggested New taxes on candy, drugs, and synthetic nicotine products — fees that were ultimately rejected by the state Legislature.

If Massachusetts imposes more taxes on wealthy individuals, Slater said he can’t say with certainty it will continue to do so.