Tuesday, August 20, 2024

Massachusetts raised taxes on millionaires to give its students free meals

The tax has brought in $800 million more than the state expected.

Tod Perry
08.20.24

via Nevada Department of Agriculture/Flickr
Children enjoying their school lunches.

The state of Massachusetts passed a 4% tax hike on residents making over a million a year in 2022, which took effect in 2023. The tax has raised more revenue than lawmakers originally expected and provides free school lunches for the state’s children.

Before the tax hike, Massachusetts residents paid a 5% annual income tax. After the Fair Share Amendment went into effect, those making over $1 million a year now pay an additional 4% on the portion of their income above $1 million.

The extra income generated by the tax means the state can now afford to provide free school lunches, free community college for those 25 and over and expanded financial assistance for state schools. The tax also funds transportation projects, including road and bridge repairs and new bicycle lanes.

The free school lunches should significantly impact food insecurity in the state. A 2022 study from the Greater Boston Food Bank found that 33% of Massachusetts households were food insecure in 2022. Massachusetts is now the 8th state in the country to offer free school lunches for all students.



"[F]ree universal school meals will literally change lives, full stop," Democratic Representative Jim McGovern said in a statement. "No child in Massachusetts will ever have to wonder how to get through the school day on an empty stomach."

Since the tax hike took effect, it’s generated $1.8 billion for the state, $800 million more than the state legislature and Governor Maura Healey planned to spend in 2024.

“This is exciting because it's the first concrete numbers we have seen showing that 'Fair Share' revenue is coming in far above the initial projections,” Andrew Farnitano, a spokesperson for the Raise Up Massachusetts campaign that pushed for the surtax, said according to WGBH. “These numbers show that the commonwealth collected nearly $2 billion in that year already, with a few months to go. What that means is there will be even more money available to spend on the critical transportation and public education needs that Massachusetts has.”



The short-term success of the wealth tax is welcomed in many corners of Massachusetts, but some believe the honeymoon could be short-lived. Massachusetts isn’t the only state in the nation and its high-income earners can choose to move to states such as New Hampshire, Florida, or Texas, where they won’t have to pay a state income tax.

Wealth taxes are also associated with a drop in overall economic activity, which can depress wages for lower-income earners.

“Whatever short-term financial benefit the state will receive from the income surtax will be outweighed by the long-term negative effect this tax is having on the state,” Paul Craney, a spokesperson for the Massachusetts Fiscal Alliance, said according to WGBH. “It's chasing out high-income earners and making the decision very easy for taxpayers who are regularly impacted by this tax to domicile in more tax-friendly states.”

It’s said that states are the laboratories of democracy, and so far, the experiment in Massachusetts appears to be working as planned. What remains to be seen is whether the tax hike eventually leads to a loss in revenue because high-income people who pay a significant percentage of the state’s revenue choose to move somewhere cheaper.

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