'Millionaires tax' has already generated $1.8B this year for Massachusetts
bostonglobe.com
bostonglobe.com
As someone who is within the top 5% of household incomes, feels very wealthy for any practical needs, and is not even at half the threshold required to pay this tax, I am a huge supporter.
I’m a bit confused how they failed to accurately predict the amount of revenue this would generate though. Why isn’t this an easy task given they already have income numbers for regular flat taxes?
Also, if people are going to move to avoid higher taxes, they may not move all at once, and predicting that is likely hard, too.
Better to underpromise and over deliver with tax revenues, anyway.
Windfall years are hard to predict.
Also, it’s much easier to get to a $1M peak income (inheritance, individual contributor at IPO, etc) than to get to $1M mean income (become a VC or executive).
I’d be curious to see a histogram of the 5-year rolling average incomes of the people paying this tax.
In a sibling comment, I explained what the situation looks like for that group out here in California (hint: people paying these taxes can’t necessarily afford a house).
Also, money is not worth the same amount here as it is in other states. You may as well be comparing British Pounds and US Dollars without applying an exchange rate (except that the gap between the dollar and pound is currently smaller than the gap between US dollar in California, and, say, Arizona).
One of the problems of wealth no doubt, but I am still bereft of tears for them. Imagine trying to make due with the merely the median household income in such a rich state, and not even getting the odd million dollar windfall once in awhile. And then realize that half of households must make due with less than that.
I'm a life-long renter with a family and elderly mother to support, and an IPO windfall would give me some much needed breathing room.
I don't know who you picture when you think of a windfall recipient, but I can assure you I am not lighting any cigars with $100 bills.
(Edit: and that’s aggressively acting as if the marginal income tax rates were applied to the whole thing)
Consider building a house after the trump tax hikes in California with $1M from the top tax bracket.
After income tax, there’s $490K left.
Next come the Canadian lumber tariffs, which increased base cost per square foot from $300 to $360, which is another 20% effective tax.
Now there’s only $400K left. (Covid also increased prices. Ignore that.)
A normal time to IPO is 5-10 years, during which time people accept a depressed salary. The windfall post-tax is only $40-80K per year per million paid out, and salaries are typically at least $50-100K under market value.
On top of that, there are local “screw the rich people that can build homes” fees and regulations that nearly double the cost of construction, so that $1M ends up being $200-250K in actual purchasing power. So, assume they but instead of build, and don’t pay those fees.
$490K is something like one third of a house around here, so the person ends up borrowing to cover the tax.
Their average income was something like $240-280K (pre inflation numbers, pre-tax), which is 91th percentile California household income, and those are “jackpot” years for that person.
However, they ended up paying two years pre-tax salaries (3 years post tax) in income tax if they buy a house, and 6 years post-tax salary if they build.
Of course, the above is nuanced, so most people are all like “yeah, screw the rich” without realizing these taxes disproportionately hit the middle class.
It’s “only” another 4%, but if the millionaire tax ends up increasing someone’s effective tax rate from 76% to 80%, then it cuts post-tax income by almost 20% and it hits people whose average incomes are middle class.
I have no idea if things are like this in Massachusetts.
Building an expensive house in California is a specific choice that you do not need to make
Does this also hit people with large amounts of accumulated wealth, or is it mostly aimed at the middle class?
I ask because, in California, when people cash out after an IPO, they often find that they pay over 50% marginal tax. This happens even though their average earnings over the time period where they earned the stock were nowhere near the top tax bracket.
On the other hand, ultra wealthy people involved in the same IPO have all sorts of mechanisms at their disposal that make it easy to avoid the big tax hit. (Most of the strategies involve taking on positive expectation risks with $100K’s of downside, which you should not do unless you’re a multi-millionaire)
Anyway, the people in the former group are sometimes called HENRYs (high earner not rich yet), and I get the impression that one group pays a much higher percentage of their earnings in tax than any other group. When these millionaire taxes are proposed, they usually target Henry’s, but not people that are wealthier than that.
In MA you tack on 5%; and now an additional 4% for income over $1M
Consider a billionaire that doesn’t work but has passive investments that pull in about $100M per year.
They can borrow against the assets for close to 0%, or they could donate the gains to their own charities, keep the assets in shell companies that own hotels they live in, etc, etc.
This 4% millionaire’s income tax won’t touch any of that.
The best I can come up with is a tax on loans larger than X with assets that meet the points ABC used as collateral.
On the other hand though, I can make a case that they shouldn't be taxed anymore as it is. The assets they hold generate the majority of the taxes collected anyway. Bezos might not pay a lot in taxes, but amazon does and the amount it generates in sales taxes and income taxes is enormous.
It's a difficult problem and it's why progress has been stagnant in this area for decades.
Ok, here's the science: [insert libertarian propaganda here]
Whoever said anything about Libertarianism?
Only "rich people" and "dupes for libertarianism" "seem to" prefer low taxes? This is seriously how you think you are going to participate in a discussion, and this is your premise that you think needs to be debated?
In citing communism, I was only matching your hyper-defensive snark and substance avoidance by throwing around a roughly opposite term that is meant to have a negative connotation. Just as you have repeatedly done by introducing a negative connotation for "libertarian", which again I absolutely am not. Libertarian ideology is not the opposite of pro-tax policy advocacy. What else?
I think your problem is you're treating "trickle-down economics" as a synonym for "low taxes," when it isn't.
> In citing communism, I was only matching your hyper-defensive snark and substance avoidance by throwing around a roughly opposite term that is meant to have a negative connotation.
Communism is a dead boogeyman, while libertarianism is a thing that still has some life in it.
I'm contending that you putting words in my mouth is garbage rhetoric and that you should know better.
That higher tax revenue is not an absolute good; primarily because those who impose taxes are incentivized to do so via variously legal and unethical pay that diverts tax funds from their supposed intent back to these people. To the point that the supposed intent should be assumed to be often false until otherwise proven not only by funding but by results.
And that the economic system in general is inherently flawed to the point that there is no solution that will satisfy most people either via trickle-down economics nor via heavy taxation. A slave system is not fixable by free markets, socialism-communism (old school if militant feudalism hidden so that low-wits can get behind it), nor by anything else.
I'm not saying that I have a better solution as far as maintenance of civilization is concerned, but only that the system of money is fundamentally a people-ownership system that inherently cannot offer solutions, either, and out of which no ethical nor practical justification for high taxation is possible. Unless the goal is explicitly to create wealthier feudal lords that do absolutely nothing but to extract taxes to support themselves.
Everyone should pay their taxes. No one has to accept the lie that more taxation is good taxation.