Downtown View:What Happens to the Millionaires?

October 17, 2017
By

By Karen Cord Taylor

The constitutional amendment that imposes a “millionaires’ tax” will likely be on our ballots in November, 2018, along with the candidates for governor and Congress.

You probably already know that this amendment would levy an additional tax on any person or couple who makes more than a million dollars in a year. We all pay a federal income tax, which varies depending on many factors. We also pay the state 5.1 percent of our income, no matter whether we make $50,000 or $500,000. We cannot claim many deductions on our state income tax, as we can when filing our federal taxes.

If this amendment passes, in the year 2019 anyone making more than one million dollars would pay an additional 4 percent on the amount that exceeds one million.

Supporters estimate the new tax would affect about 20,000 people and predict that the additional revenue would reach about $2.2 billion—all to be used for education and transportation.

Those who support the measure say that “to whomsoever much is given, of him shall much be required.” Those who oppose the measure say it would hurt the state’s business climate and cause the wealthiest among us to move to another state. While Gov. Charlie Baker says he’s against more taxes in general, I bet he’s secretly hoping this amendment will pass, giving him some wiggle room in a budget that never seems to be enough.

While I understand the basics about this amendment, I’ve never seen an example of how an actual family would be affected by it. So I’ve created one.

Joe and Sally are in their forties and work in real estate development and finance. Together they will make $2 million in state taxable income for the year 2019. They live in a nice but not lavish house, and they have no mortgage. Their second house in Maine also has no mortgage. Their kids are in private school, since I’ve placed them downtown, and they decided to forego the uncertain public school process. Those kids are expected to be responsible, do well in school and not give their parents grief with drugs or any other problems.

Since they live downtown and don’t want the hassle, they have only one car, again nice, fully paid for, and Joe has a driver he can call on when he needs to get around. They have health care through their work, and they don’t worry much about spending, but they are not profligate. Their kids will be loan-free in college and throughout graduate, medical or law school, should they choose to go.

I’m thinking they might be typical for people in their income bracket, since not every rich person desires expensive jewelry, aspirational handbags and gold-plated fixtures, especially in New England. I’m thinking they are responsible people who want to pay their fair share. Of course, fair is subjective.

So how would this amendment, if passed, affect them? They would still pay Massachusetts 5.1 percent on their $2 million income or $102,000. In addition, they would pay an extra 4 percent, or $40,000, on the million dollars more than the first million.

How much will they notice forking over an extra $40,000? Will it reduce their standard of living? Will it cause them pain? Will it prompt them to move to New Hampshire and commute long distances or change jobs? Will it hurt Joe’s real estate development plans or Sally’s finance business? Will it seem worth it since they may get better T service downtown and better roads and their businesses could prosper more since their future employees, Massachusetts kids, could be better educated because of the extra resources for education that this bill promises to provide.

I don’t know the answers to those questions. I imagine paying an extra 4 percent on incomes over a million will play out differently for each family, depending on their outlook on life. It will be interesting to see what happens.

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