Taxes

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“Excess” as Mirage: How the 62F Tax Cap Distorts Our View of Massachusetts Tax Revenue

The 1986 tax cap law, also known as “62F,” artificially limits the amount of tax revenue available to address priorities like affordable, quality childcare, safer public transportation, and affordable housing. Moreover, there are flaws in the 62F law and its underlying formula. 62F tells a story about revenue in Massachusetts, but it is misleading.

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Fair Share Would Increase Total Tax Rates Only Modestly for Most with Incomes Over $1 Million

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.

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The Fair Share Millionaire Tax and Home Sales: What 2021 Data Shows

Based on industry data from the Warren Group on home sales in Massachusetts, previous analysis has shown how rare it is that a sale might generate taxable capital gains of $1 million or more. But what does the data say about home sales that might have created taxable income over $1 million in 2021?

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ALL TAXES REPORTS

The Myth of the One-Year Middle Class Millionaire

“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).

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Very Few Small Businesses Sell for More Than $1 Million; Even Fewer Would be Subject to Fair Share

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

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Even Among Retirees with High Wealth, Few Will Pay the Fair Share Tax

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.

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Fundamentally Flawed: 62F Formula Overstates “Excess” by $1.4 Billion

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”).

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Where Might Home Sales Be Subject to the Fair Share Amendment? A Local Breakdown

In the majority of Massachusetts cities and towns, no homes sold for a net gain of $1 million or more, meaning they wouldn’t be subject to any additional taxes under the Fair Share Amendment.

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62F Credits Benefit the Rich

The “tax cap law,” or what is known as “62F,” sets an artificial limit on how much tax revenue Massachusetts can collect, regardless of the current needs of the Commonwealth. This law in effect transfers to higher income households tax revenue paid by lower income households and does nothing to improve racial or economic equity in our state.

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Interactive Map: Most Home Sales Will Not Likely Lead to Fair Share Tax Payments

Even in Massachusetts’ hot housing market with many homes selling for over $1 million, the vast majority of all home sales will not subject the home sellers to a proposed “millionaire’s tax.”

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Fair Share Facts: New Report Tackles “Millionaires Tax” Claims

Contact: Reginauld Williams, 617-426-1228×102, rwilliams@massbudget.org For Immediate Release: Thursday September 15, 2022 BOSTON – With just over 50 days left until the general election here …

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Best Research Underscores Value of Fair Share Amendment for Massachusetts Residents

An extensive body of research shows that Fair Share would improve tax fairness, support economic and racial justice, and strengthen our state economy. The research contradicts inaccurate and/or misleading claims made by opponents. Very clearly, Fair Share would have a meaningful, positive impact on millions of people and every community throughout the Commonwealth.

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Fair Share Tax on Incomes Over $1 Million Would Generate at Least $2 Billion a Year

MassBudget estimates that the Fair Share tax on incomes over $1 million is likely to generate at least $2 billion a year in new revenue …

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A Blast from the Past: Reagan-Era Tax Law Hits Hard

You are not alone if you had never heard of the Massachusetts “tax cap law,” or what is also known as “62F.” This Reagan-era law sets an artificial limit on how much tax revenue Massachusetts can collect, regardless of the current needs of the Commonwealth.

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Average Income in Massachusetts for Every Occupation Is Below $1 Million

According to the most current federal Bureau of Labor Statistics (BLS) data for Massachusetts (2021), average income for every occupation listed falls far below the $1 million threshold proposed in the Fair Share Amendment.

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Massachusetts’ Taxes Are About Average

Massachusetts currently has the highest per capita income of any state, but the Commonwealth lags many states when it comes to using those resources to support funding for education, health, human services, transportation and the like. Massachusetts is even below the national average.

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Four Reasons We Need Strong Estate Taxes

Explainer via Napkin Finance With Legislators debating potential changes to taxes on large estates, it’s important to remember why we have taxes on the transfer of …

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Current Estate Tax Proposals Would Give Largest Benefits to Wealthiest Estates; Alternative Method Would Fix This Problem

The tax on inherited estates is Massachusetts’ only tax that directly reduces wealth inequality. Although the pandemic has highlighted disparities between rich and poor families, the Governor and some in the Legislature have proposed changes to the estate tax that would largely benefit the state’s wealthiest households.

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