#2022-2 January 14, 2022

Revenue Committee Hears Estate Tax Reform Proposals Targeted to Keep Capital in Massachusetts

On Wednesday, a long-running debate over the state’s estate tax was revived on Beacon Hill as the Revenue Committee considered several Association-supported bills calling for reforms or outright abolition of the levies charged when assets are passed along following a person’s death.  Eight different proposals to reform the estate tax currently sit before the Committee, ranging in scope from scaling the $1 million tax threshold up to scrapping it completely.  In written testimony, the Association urged the Committee to support Representative Shawn Dooley’s (R-Norfolk) bill, H 2881 - An Act relative to the Massachusetts Estate Tax, as well as several other measures more broadly.

Representative Dooley’s bill has been filed several sessions in a row but has not advanced to the House or Senate floor.  The measure increases the level at which the estate tax kicks in from $1 million to $2.75 million and adds a homeowner exemption in an attempt to strike a middle ground between its financial benefits and the burden it places on residents who have assets -- which includes property and, in some cases, retirement accounts and life insurance -- between $1 million and $5 million.  With the current threshold of $1 million, proponents of estate tax reform believe that the state is negatively impacted by residents who move away to avoid having to pay each year -- an argument similar to one made about the proposed 4 percent surtax on household income above $1 million.

To view the Association’s testimony, click here.

Study: Millionaire’s Tax to Raise $1.3 Billion After Relocations, Tax Avoidance Reduce Estimates by $670 Million

The so-called “millionaire’s tax,” which is expected to be on the November ballot, will add approximately $1.3 billion in revenue according to a new report from the Center for State Policy Analysis at Tufts University.  The analysis provides an updated estimate of how much money could be generated by the tax law change, and it largely confirms revenue projections made last year by the Beacon Hill Institute.

As we have reported previously, Massachusetts lawmakers voted last year to put a constitutional amendment on the 2022 ballot that adds a 4 percent surtax on household income above $1 million, pledging to dedicate the additional revenue to just two areas of spending: education and transportation.

The new report estimates that if approved by voters, the new tax will be collected from about 21,000 state taxpayers, or less than 1 percent of all households.  These taxpayers earn about 22 percent of all taxable income in Massachusetts.  Using state and federal data, the center estimated that 2,000 households earned more $5 million in 2019 totaling 11 percent of all income in the state.  The projection takes into account the likelihood that some high earners could leave the Commonwealth because of the policy, while others will engage in "tax avoidance" strategies to lower their tax burden.  These measures are projected to reduce the state’s overall revenue from the income surtax by 35 percent or $670 million in 2023, down from a possible $2.1 billion estimate publicized by proponents of the ballot question.

A new poll released Thursday from the MassINC Polling Group found that 70 percent of registered voters support the ballot question, including 44 percent who said they strongly support a surtax that would be spent on transportation and education.  Only 10 percent of those surveyed said they were still unsure.