Because the Fair Share surtax would apply a 4 percent surtax only to the portion of a household’s taxable income above $1 million, the total tax rate of the vast majority of Fair Share-affected filers would be much lower than the top rate of 9 percent.

“One-time” occurrences of $1 million income are relatively rare overall, and in fact much rarer for the middle-class. It is far more common for tax filers who exceed $1 million in annual income to do so year over year. An examination of available data suggests that when a middle-class taxpayer sells their small business or home, they would be highly unlikely to have a taxable income over $1 million, the point at which additional income would be subject to the new proposed tax under ballot Question 1 (Fair Share).

Will small business owners be subject to the proposed Fair Share tax if and when they sell their businesses? Very unlikely.

The proposed “millionaire tax” only applies to the portion of a taxpayer’s annual taxable income over $1 million. For many retirees, much of their income is not subject to the income tax and therefore not subject to an additional tax on income over $1 million. And wealth, such as personal savings and investments, are not subject to the income tax. Even when wealth is sold to generate additional financial gains, this income is often tax-exempt or shielded by widely used deductions.

The $2.9 billion estimate of 62F “excess tax collections” recently certified by the State Auditor overstates these net Fiscal Year (FY) 2022 collections by $1.4 billion. The problem is not that the Auditor miscalculated but that the calculation as stipulated in the 62F statute fails to account for situations where taxes are received by the Commonwealth in one fiscal year, but corresponding, offsetting tax credits are not applied until the following fiscal year. This is one of the many fundamental flaws in the 1986 tax cap law (referred to as “62F”).