The proposed millionaires tax in Massachusetts would “adversely impact” a significant number of small business owners, ultimately hampering the state’s economic recovery from the coronavirus pandemic, according to a new study published by Pioneer Institute.
A proposed state constitutional amendment would add a 4% surtax to all annual income above $1 million.
If the surtax passes, it would apply to as many as 13,430 of the state’s pass-through entities — which are often small businesses structured as S corporations, sole proprietorships and partnerships.
“Promoters of the surtax always point to its impact on some nebulous ‘millionaire,’ ” said Pioneer Institute Executive Director Jim Stergios. “The tax will impact many more people and small businesses, and through them, tens of thousands of employees.”
From 2010 to 2018, the number of pass-through employers in the state grew by 11.3%. By 2018, they accounted for 57.1% of Massachusetts’ private sector workforce.
“The past year has been a historically difficult time for a lot of ‘Main Street’ business owners in Massachusetts,” said Nina Weiss, who wrote the Pioneer report with Greg Sullivan. “This is a time when we should be prioritizing the resilience of the state’s economy and getting people back to work, not raising taxes on small businesses.”
The millionaires tax could also deter future entrepreneurs from starting businesses here, they write in the report.
Lawmakers this session are likely to advance a ballot initiative that would propose a constitutional amendment to impose the surtax.
Proponents of the tax — who call it the “Fair Share Amendment” — say the measure could bolster education and transportation funding by $2 billion.
“The Pioneer Institute’s latest missive rehashes an old argument for why multi-millionaires shouldn’t pay their fair share of state taxes,” Raise Up Massachusetts, the coalition behind the amendment, said in a statement. “It’s either intentionally designed to mislead or the Pioneer Institute is confused. The Fair Share Amendment wouldn’t increase the taxes of any businesses, only a few multi-millionaire business owners.
“The Fair Share Amendment is simple: taxpayers with total income of more than a million dollars in a single year would pay an extra 4 percentage points on their second million, and every million after that,” the coalition added. “Whether their income is from salaries, stocks, bonds or a ‘pass-through entity’ is irrelevant to the current or proposed tax rate. Owners of S-corporations and other pass-through entities would continue to pay income taxes only on their business’s profits, after subtracting all its costs.”
Residents could vote on the ballot question in November 2022.
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April 21, 2021 at 04:00AM
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Massachusetts millionaires tax would ‘adversely impact’ many small businesses: Report - Boston Herald
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