Tax advisors have long said it's inadvisable to die in Massachusetts — one of the least generous states for estate levies — but now it may also be worth thinking twice about living there.
At least that may be the case for those anticipating earning over $1 million anytime soon.
Massachusetts voted in favor of imposing a 4% surtax on taxable incomes over $1 million after a closely fought campaign. The levy, approved by 52% of voters in November, kicked in at the start of this year.
"Certainly, some of our clients have talked to us about how do they leave the state," John Capone, managing partner for the Boston hub at accounting giant KPMG, said in a recent interview. "That certainly is something that we knew was going to have an impact."
The surtax revived memories from decades ago when the tax burden was so high that citizens' groups dubbed the commonwealth "Taxachusetts." Back in the 1970s, the share of income going to state and local taxes amounted to almost 14%, the third-highest in the nation.
Massachusetts now has a flat 5% income tax. About 0.6% of households would be hit by the new 9% rate, according to a study by the Tufts University Center for State Policy Analysis last year.
The Washington-based Tax Foundation estimated last year that the Massachusetts ranking in the policy-analysis group's State Business Tax Climate Index, would decline to 46th in the country, from 34th, if the surtax passed.
Advocates led by the Massachusetts Teachers Association say the "Fair Share Amendment" will channel billions of dollars of revenue to education and transport.
Their campaign efforts overcame objections that Massachusetts has little need for extra revenue, given a 2022 surplus that proved so large it triggered a rare general refund to taxpayers.
The teachers' group's priorities for this year include expanded financial help to students at the state's colleges and universities, and boosting pension payments for retired educators, which have been undermined by inflation.
'Exodus of People'
The Boston Chamber of Commerce was among opponents of the measure, flagging concerns that the surtax would prove particularly painful to so-called one-time millionaires — such as those who receive more than $1 million in taxable income from selling a business or property.
"The timing of this couldn't be worse," said Jim Rooney, chief executive officer of the Boston chamber. "We're already seeing an exodus of people from Massachusetts," amid a "very competitive environment nationally" for businesses with high wage-earners, including top scientists, he said.
