Want More Equality of Opportunity and Social Justice? Copy Massachusetts’ Millionaire’s Tax

Omar Ocampo

 November 5, 2024
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This past summer, the Governor of Massachusetts Maura Healey signed a budget bill that guaranteed universal access to in-state community colleges. No matter age or socioeconomic background, irrespective of the degree or certificate sought, the tuition and fees at these fifteen institutions of higher learning are waived.

The $117 million public investment allocated to the MassEducate program was made possible two years ago when, in an exercise of direct democracy, Bay State voters defied the tenets of neoliberal ideology. They approved a landmark progressive tax bill – known as the Fair Share Amendment – that imposed a four percent surtax on annual incomes above one million dollars.

Lawmakers have seen an extraordinary windfall for the state’s coffers. A total of $2.2 billion was collected in the first full year of implementation, far exceeding the original forecast of $1 billion.

The anti-tax movement’s dystopian warnings have failed to materialize. Massachusetts continues to thrive as an economic hub with attractive amenities and opportunities despite being a “less competitive” business market. The last five quarters have seen sustained economic growth with real GDP increasing 3.3 percentin the second quarter of 2024. High net worth households and individuals with seven figure salaries have not fled in droves to tax free havens and, judging by the revenue collected, strategies to shift income or avoid the surtax altogether fell flat

Even the fear of bureaucratic mismanagement and the diversion of funds away from education and transportation were unfounded. According to the Massachusetts Budget and Policy Center, the first two budgets put forth by the state have allocated Fair Share funds to these two sectors.

We already see glimpses of the transformative potential the Fair Share Amendment can have on public finances and the positive impact it can have across the Commonwealth. For the fiscal year of 2025, $762 million has been allocated to education initiatives. Breakfast and lunch are now free for all students attending public schools. $80 million has been awarded to financial aid programs like MassGrant Plus for state university students. The transportation sector has also been awarded a plush $538 million to improve public infrastructure, lower transit fares, service debt, expand free regional bus service outside of the Greater Boston Area, and provide worker training.

The Fair Share Amendment demonstrates how a straightforward and well-designed progressive tax policy that targets millionaires can achieve popular support and be easy to enforce. According to my analysis of income and tax data from the IRS in 2021, individuals who earn a million dollars or more account for less than one percent of all taxpayers in the state. In other words, the tax is applied narrowly.

But more importantly, how the revenues are spent from Fair Share underscores a commitment to equality and social justice. For every childcare grant given, for every early literacy program attended, for every free meal consumed in a public school, for every college-level course completed, and for every journey taken for free on a new bus route, society as a whole benefits.

An inequality fighting tax policy creates a better learning environment, and it expands access to jobs and opportunities that otherwise would not have been available absent the fair share. It builds the common good. Voters in Illinois will get the opportunity to follow in the footsteps of Massachusetts next week with a ballot measure — called the Property Tax Relief and Fairness Referendum — that seeks to implement a 3 percent surcharge on incomes above a million dollars. If passed and enforced, the estimated $4.5 billion in revenue generated will be used to lessen the financial burden on homeowners who are currently paying extremely high property taxes in the Prairie State.

Massachusetts’ Fair Share should serve as a model to other states seeking to implement their own progressive taxes on million-dollar incomes to boost social spending, even including those who currently do not have a state income tax.

Omar Ocampo is a researcher for the Program on Inequality and the Common Good at the Institute for Policy Studies.