Massachusetts passed a 4% millionaire's tax last year. Now every public school student is going to g

[In It to Win It]

Massachusetts passed a 4% millionaire's tax last year. Now every public school student is going to get free lunch.

https://www.yahoo.com/news/massachusetts-passed-4-millionaires-tax-172447869.html

Massachusetts voters passed a constitutional amendment that went into effect at the beginning of 2023 to put an additional 4% state income tax on people who make more than $1 million per year.

Appropriation of the proceeds from the tax is subject to the state legislature, but lawmakers are expected to use it for public education and infrastructure repairs, according to local Boston television station WCVB.

State House News Service, an independently owned news wire, reported that $1 billion of the state's record $56.2 billion fiscal budget for 2024 came from the state's new 4% tax on millionaires. Massachusetts Gov. Maura Healey signed the budget on Wednesday, making Massachusetts the eighth state to adopt a free school lunch plan since federal free school lunches which started during the COVID-19 pandemic ended.

The outlet reported that a portion of the $1 billion gathered from the new income tax will be used to provide all public school students in Massachusetts with free breakfast and lunch. Some of the money will also be allocated to help undocumented immigrants who went to high school in Massachusetts qualify for lower in-state tuition rates, according to SHNS.

[Aviation Pro]

1. Winston Churchill once said

"The best investment a country can make is to put milk into babies."

[Lunabell]

2. But, billionaires need a second mega-yacht!

Those children can just pull themselves up by their bootstraps and work for their food!!

On edit: Sarcasm, please don't alert, lol.

[AllaN01Bear]

28. that is what they would say. nmake it higher so we can pay things like roads

and something like free college tuition for free.

[lostnfound]

49. No worries, they get a stupendous tax break on mega-yacht

If they can claim half of the hours they spend on it as a business expense

[brush]

3. Good governance is not that hard if you have common sense...

instead of selfishness and a greed for power.

Republicans, are you getting this? Pass laws to make like better. It's not rocket science.

[Sky Jewels]

18. "Governing" is just a pretense for them.

For four decades, their only goal has been to funnel ever more money to the very top.

[ProfessorGAC]

4. Not Really A "Millionaire" Tax

It's an extra 4% on income over a million.
My guess is this never would have flown if it were based on being a millionaire.
Lots of people retire with total assets in 7 figures. That doesn't make them rich, but they are millionaires.
This is a very high earner tax, not a millionaire tax.

[Evolve Dammit]

7. wasn't it over 90% under Eisenhower?

[ProfessorGAC]

19. Only Sort Of

Yes, there was a 90% bracket for income above $200k ($400k for couples filing jointly).
However with very generous shelters, deductions, exemptions & deferral options only a tiny fraction of such high wage earners paid it.
Typically, a million per year earning couple paid about $480k on a million taxable. If a million was taxable, the earner probably made about $1.2 million. So, the effective tax rate was around 40%. (More or less).
It's the reason why the "it was 90% under Ike" isn't an effective sakes pitch for higher rates. It's too easy to show the flaws with simple math. (Yeah, this was one of my econ projects in business school.)
I'd like to see 2 more marginal rates added. 39.5 & 44%, with an increase is the standard deduction to $35k.
Puts $2,000-7,000 back in a lot of middle class pockets while raising taxes on ultrahigh earners.
Oh, & I'd add 2 rates to gains & dividends. 25 and 30% seem reasonable.

[Evolve Dammit]

31. I asked the right person. Thanks. Wish it could happen instead of the accelerating disparity. nt

[Silent Type]

32. Bet most high earners would be fine with a 39.5% and 44% tax bracket IF they knew that would be it.

But is won't because just about everything majority of people want -- education, jobs, healthcare, infrastructure, climate, bolstering Social Security, etc. -- will cost more than the higher tax bracketts will produce.

[ProfessorGAC]

34. Not Per My Numbers

If high earners paid as I described, the deficit would be halved, with no cost cutting.
Anything that limits borrowing is good for Social Security.
I'd also complete eliminate the cap on Social Security premiums. Then, I'd means test the benefit, but at a pretty high level.

[Silent Type]

39. That's why we have resistance to higher tax brackets because wealthy know it won't end there.

For example, you just mentioned increasing the SS Cap, ON TOP of two new tax brackets for the wealthy. You just increased their taxes by 15 percentage points by eliminating cap on incomes above roughly $160,000. And that's not even mentioning state and local tax increases.

The additional tax brackets might cut the deficit in half, although not convinced of that. But cutting the deficit won't make people happy when they want healthcare, education, childcare, increased SS and safetynet, etc.

I agree with the increased tax brackets you mentioned, some increase in SS tax, big increases in estate taxes, increased capital gains taxes, etc. But, don't think it is going to produce enough to pay for everything we want.

I really believe if we could make a deal to tax higher incomes -- increased tax brackets, but that's it for your lifetime -- it wouldn't be as contentious. But we can't do that, unfortunately.

There have been times in my life where I was fine dramatically increasing taxes on incomes just above what I make. Heck take every penny above $200K. But, I don' think the outcome will be what people hope for.

[Bettie]

51. And yet, they still have more than they can spend

in ten lifetimes.

It isn't as though any of them will suddenly be living in poverty. But, they might have to budget a little for that tenth mansion or their fifth mega yacht. Plus, they are able to manipulate the system to make it look like they have no income or very little. Us normals can't do that.

[NowISeetheLight]

47. Yet With

Yet with the high taxes they still built wealth. It was just on an elevated level as everyone else built too. It wasn't until the Reagan then Bush 2 then Trump tax cuts that the wealth gap totally went crazy. Rich people got richer even with a 90% tax.

[DFW]

10. Well put.

You don't pay an extra $40,000 just because your income tops $1 million. If your income is $1,100,000 then you pay an extra $4000. And you're right. It would never have flown if it had been just been based on theoretical net worth. If you bought a house on Nantucket 30 years ago for $165,000 (as I found out an old classmate of mine did), and it is now assessed at $2,000,000 (his isn't, I just pulled that number out of the air), that doesn't mean you received an extra $1,835,000 in income, it just means you can get a lot of money if you want to sell your house and sleep on the beach.

[Kennah]

11. And if you're income is $1 million a year, you've long ago reached millionaire status

[DFW]

13. Only if your income has been that high for a while.

There are always some Route 128 whizkids in Massachusetts who made $37,500 three years ago who have rocketed to $1 million today just by being super-smart.

[twodogsbarking]

22. The devil is in the details. You are spot on.

[GoodRaisin]

5. Good.

People making over a million a year won’t miss it, and they should be giving back to the community if the community is doing so much for them.

[NoSheep]

6. THIS!

[Lonestarblue]

8. Progress happens when Democrats are in office.

The previous governor, Republican Charlie Baker, oversaw several years of letting the public transit system fall into disrepair, to the point that many people refuse to use it anymore. Governor Healy recently announced a new contract with the transit union and investment in restoring the MBTA to a reliable public transit.

[hibbing]

21. Big D Democratic policy

Seeing it in every state with Democratic governors.

Peace

[betsuni]

25. +1

[housecat]

9. If/when more states follow, it will be a big step in the right direction.

[mahatmakanejeeves]

12. The large print giveth, and the small print taketh away. Percent versus percentage points.

Full disclosure: I do not live in Massachusetts, and I do not have an income of a million dollars per year or more.

My impression is that the current Massachusetts income tax rate is on the order of 5 percent for plain old income. I.e., not capital gains, just plain old salary and bonuses.

Right now, if you make one million per year, you pay 5 percent of that, or $100,000 in income tax. Next year, same thing.

Right now, if you make two million per year, you pay 5 percent of that, or $100,000 in income tax.

Next year, you'll pay $50,000 on the first million and $90,000 on the second million, for a total income tax of $140,000.

Put in the numbers and turn the crank. ((140 - 100)/100) times 100 = 40 percent.

RPN, you know what to do.

That "you'll only pay 4 percent more" turns into a 40 percent tax increase. Again, this is without deductions, exemptions, capital gains tax rates, and so on.

If you brought in 3 million in 2022, you paid $150,000 in income tax.

If you bring in 3 million in 2023, you'll pay $50,000 on the first million, and then $180,000 on the next two million. Your total income tax for tax year 2023 will be $230,000. That's a tax increase of ((230 - 150)/150) times 100 = 53.3 percent.

Four million income in 2022? $200,000 income tax. Four million income in 2023? $50,000 on the first million and $270,000 on the next three million. Your 2023 tax year income is $320,000, or a ((320 - 200)/200) times 100 = 60 percent tax increase.

Am I wrong? Are there any CPAs from Massachusetts on DU?

Thanks.

[DFW]

16. Your numbers seem accurate. And the federal income tax must be paid on top in any case

I also neither live in Massachusetts nor have $1 million in income.

I'll never know what it is like to have an income of $4 million a year, but if my tax burden were to suddenly go up by an extra $120,000 a year, even with a GAI of $4 million, I might, depending on my living costs, start to feel a pinch. Because of some negative loopholes in the Double Taxation Treaty between Germany and the USA, although Texas has no state income tax, between the USA and Germany, I am already being asked to pay a 73% (varies from year to year, but only slightly) in total income taxes, so all this domestic stuff goes right past me anyway. There are exactly two countries on earth that do not recognize residence-based taxation: Eritrea and the USA, and I am a citizen of one of them.

[erronis]

15. But the wealthy don't earn income.

They have schemes to have their investments pay them in loans that never get repaid, or if so in favorable circumstances.

Seems there are some shenanigans (a good Boston word) involving Roth IRAs or some other retirement account manipulations.

[DFW]

24. Loans on theoretical assets are a problem with no good solutions.

The fact that they are even possible is the essential problem. You can't fairly tax theoretical paper gains, because they could go down just easily. The IRS can't be expected to tax a billion in theoretical gains and then refund a few hundred million the next year (or next month!) if the owner's stock takes a nosedive. The IRS would have to double its staff just to handle the paperwork.

I do have a Roth IRA, although I don't know about any shenanigans available to me (maybe you could enlighten me?). When the Cheney-Bush recession was in full swing, I was told about a Roth IRA conversion. I asked what's that? The accountant said it meant I could pay all taxes due on the value at any given time. After that, as long as I didn't touch it until age 59½, if the value of the stocks went down, too bad for me, I could not take any deductions, but if they went up, I owed no taxes on the gains, either. But I had to pay up all taxes due on the full amount at the time of conversion. I figured things would never get worse than they were after what Cheney-Bush did to us. So I emptied the piggy bank and paid up in full, and I was right. Now the stock market is four times as high as it was then, and with the Roth IRA, your are not required to start taking money out of it by age 70 like you are with a regular IRA (on which you haven't paid the taxes yet). I haven't touched mine, because the Germans want 50% of mine, even though I was still legally a US resident when I did the conversion, and the law says it's 100% mine (the Germans don't care). That is currently under dispute, but the German constitution specifically forbids double taxation, so I have a chance. Their Supreme Court struck down a wealth tax for that exact reason.

[erronis]

38. Since you have a more global view, what do you think of a VAT in the US?

[DFW]

50. Very astute question

I am actually very much against introducing a VAT into the USA for several reasons.

First of all, unlike the cantons, provinces or states of the European countries, each state in the USA already has the right to levy its own state sales tax (or not, if they so choose). They can examine their own local financial situation and decide how much, and what is exempted. Sure, there are the obvious cross-border conflicts (MA-NH being one I know has confounded MA for decades). But on a national level, I think it works rather well. It would be a nightmare to impose a national VAT on top of that, and lower income people would get slammed by it. The administration of such a thing, trying to make it compatible with state sales taxes, or, worse, trying to make allowances for states with big sales taxes, would be a bureaucratic nightmare, and it's not like the IRS has a personnel surplus these days.

In Europe, it has become pure government heroin. It started out at 10%, and the governments of Europe got hooked. They found they liked the cash infusion it gave them, and always needed more, more, more. Now most EU countries range with their VAT between 19% and 24%. Some exempt food and clothing, but it is added to most all services, and is added at every stage of production, not just to the end user on a retail level. Sometimes they give the little guy a break, but Germany, where I live, has 3 rates (19%, 7% and 0%) for three categories of food. It drives retailers nuts. In a rare burst of common sense, the EU removed the VAT on gold. Since the profit margin on most gold transactions is under 2%, making a buyer pay 20% on top basically drives legitimate transactions either underground or away to Switzerland. This way, no one is at all inconvenienced by declaring their transactions.

There are huge differences in the rates for gasoline and diesel fuel between the Netherlands and Germany, and plenty of cross-border motorists just drive across to fill their tanks where things are cheaper. In Germany, they even enacted a plainly unconstitutional tax on gasoline. It used to be that in Germany, you paid the price of the gasoline plus the mineral oil tax. Then, the Germans decided to make people pay VAT--not only on the gasoline, but on the total price of the gasoline AND the mineral oil tax. They have to pay VAT on the tax as well! Now, it just so happens that a neighbor of ours is a judge on the Düsseldorf tax court. He wrote his doctorate on double taxation, and is also a professor of tax law at the University of Bonn. I asked him if it wasn't totally illegal under the German constitution to make people pay tax on a tax. He said absolutely and 100% unconstitutional. I asked why the tax still stood. He asked, "do you know know anyone willing to spend €50,000 on a long, drawn-out lawsuit just to recover €4.75 that they got overcharged the last time they filled the tank?" He said he'd strike down the tax in an instant if the case ever came before him. But no one ever has brought it before him--or any other judge, for that matter. Welcome to Germany.

[erronis]

55. That's an incredible amount of good background info which (I thought) was a simple questions.

Perhaps I also take advantage of the differing tax rates between states and localities in the US. (I'm also close to NH which has very favorable prices on some things....)

And yes, any government will look at tax rates/assessments as a nice way to fund their projects.

Transparency and publishing of information and intentions are necessary, well and good. But the populace is not noted for caring much about information - until it bites them in their wallet.

Pure income taxes seem easy to skirt if you have enough income to hire lawyers and accountants.
Wealth taxes - the same.
Perhaps estate transfer taxes might work a bit, but again, lawyers and accountants.

Middle/lower income people are screwed - serfs and peasants and laborers.

Every now and then there is a great broom that sweeps away all the top crusts. And then it starts to grow once again.

[NowISeetheLight]

48. Elon Musk

This is what Elon Musk has done. Loans against his Tesla stock to pay for his expenses.

[Croney]

17. I have close relatives who run a MA business that grosses 2 million a year.

They urged me to vote no, saying their gross income is misleading and they're actually just scraping by. I don't know what their net income is, maybe they're not affected by the change.

I voted yes. I'm happy if my vote helped put free food in a child's mouth.

[Xavier Breath]

20. Did you tell them you voted "yes"

and if so, is Thanksgiving going to be a little awkward this year?

[Croney]

40. They know me well. We agree to disagree.

[Warpy]

23. Did you explian the difference between gross and net?

It might have made the poor dears feel better that you and so many others ignored the scare tactics and voted to feed kids.

[Croney]

41. I'm sure they know; I suspect they were fibbing about just scraping by.

[Warpy]

44. I know businesses that gross millions per year and the owners scrape by

because so much is eaten up by supplies, maintaining inventory, and labor.

A million gross aint what it used to be.

Now a million in income, that can still afford to pay its taxes.

[bluesbassman]

26. If their business is grossing $2mil a year and they're "just scraping by"...

it's pretty much one of two things; either they're pretty lousy business people and have overextended themselves (too high rent, multiple company vehicles, etc), or they run an extremely labor intensive business with a high payroll. Either way, if they're "just scaping by" the excessive income tax isn't even a remote factor in their personal finance equation so I'm baffled why they were against it. Unless of course they've bought into the GOP myth that voting Republican means you'll eventually be rich.

[Silent3]

35. A lot of business only make a profit that's a small percentage of gross income

In fact, if the laws of supply and demand are functioning well, that's as it should be when what you're selling isn't mostly one owner's talent or labor.

Grocery stores, for instance, only make a margin of 1-3%. A grocery store grossing only $2 million dollars per year would be in sad shape.

[bluesbassman]

36. Yes, but operations like grocery stores make it up in massive volume.

Mini-marts provide many of the same products as a grocery store, but their markups are much higher because they operate on a much smaller scale. Back in the 80’s and 90’s I operated a small business that grossed less than $1mil, and by being careful I earned a comfortable income even with employees. Factoring inflation, if these folks are grossing $2mil and they’re “scraping by”, they’re either not being honest to their relative or they’re in the wrong business.

[Croney]

42. There's a third thing... They were lying about just scraping by.

[bluesbassman]

43. Well as I don't know them I was initially avoiding making that guess.

But the thought occurred to me. Also, depending on one’s lifestyle “just scraping by” can cover a lot of ground.

[DFW]

27. What a business grosses in turnover is irrelevant with respect to income.

If their business grossed $2 million, but had expenses/costs of $1.95 million, then, yes, they are indeed barely scraping by, and the tax will not affect them in the slightest.

[marble falls]

29. And that's exactly how it needs to be done on a national level.

[AllaN01Bear]

30. like.

[NCjack]

33. Wow !!! That the hell is Massachusetts thinking !!! What if those poor

millionaires can't afford it and they move to -- gasp -- TEXAS ???

[JI7]

37. I always said all public schools should provide free lunch for all students

do away with things like lunch tickets and parents having to apply for it.

They can still do things like sell certain foods if students want to buy it.

But therr should be a meal that is free for all students.

[elocs]

45. Here in WI, Gov. Evers used his line item veto to increase school funding for 400 years

which makes Republicans fume.
https://newrepublic.com/post/174118/wisconsin-governor-increases-school-funding-400-years-veto-power

Wisconsin Governor Tony Evers on Wednesday partially vetoed the new state budget—a move that actually guarantees funding increases for public schools for the next four centuries.
But Evers, a Democrat and a former public school educator, used his line-item veto power to make about four dozen changes before signing the bill into law. First up, he struck out a hyphen and the “20” in the reference to the 2024–25 school year. As a result, Wisconsin public schools will now get an annual funding increase of $325 per student until 2425.

The bump of $325 per student is the highest single-year increase in revenue limits in state history, according to the Milwaukee Journal Sentinel. The paper said that Evers’s move will create a permanent annual revenue stream for public schools, as well as potentially end a major debate between Democrats and Republicans during budget writing.

Evers also slashed the proposed tax relief. Wisconsin has four income tax brackets, the lower three of which have seen tax rate reductions in recent years. The budget pill would have condensed the brackets down to three and cut rates for all of them."

[sheshe2]

46. I voted for it and I voted for my Governor.

Love her.

Even Charlie Baker endorsed her over trump's preferred candidate. Yes, he was a Rep. however he was not MAGA, hated trump and did some things right with COVID and our Sanctuary cities.

[Scalded Nun]

52. Let's keep this focus with the public schools. They have been decimated enough over the decades.

This will be welcomed!

[Wild blueberry]

53. All good

Modern version of transmuting dross into gold, kids getting fed.
Thank you.

[bottomofthehill]

54. And then there is this, they leave and blow a bigger hole in the budget. R

From the Salem Evening News

https://www.salemnews.com/news/report-mass-outward-migration-increases-fivefold/article_26a96bd8-f5bb-11ed-a4c2-5b0d04945480.html#:~:text=The%20Pioneer%20Institute's%20“Tax%20Reality,California%2C%20New%20York%20and%20Illinois.

A recent report by the Massachusetts Society of Certified Public Accountants suggests the state could see an exodus of top earners in response to the voter-approved millionaires’ tax, which set a new 4% surtax on individuals with incomes above $1 million a year.

The report, which was based on a survey of 270 accountants, found that at least 82% said their high-income clients are considering leaving Massachusetts in the next year, with 50% or more citing the millionaires tax as the primary reason.

Florida and New Hampshire were among the most popular states for relocation, the report noted.P

[BSdetect]

56. That is a very likely decision for some.

Do the people demanding these extra 4% taxes on such incomes realize it means $40000 more tax in many cases?

[bottomofthehill]

57. Many in MA already own second homes in one of those two states.