By Jeffrey T. Rogers, CPA, MST
By now most taxpayers have likely seen the commercials or heard the advertisement. Question 1 will be on the ballot this November. Alternatively referred to as the “Millionaire’s Tax” or the “Fair Share Amendment", Question 1 seeks to impose an annual 4% state surtax on personal income over $1 million effective January 1, 2023. The estimated $1.3 to $2 billion of funds raised from this surtax would be specifically earmarked for public education, transportation, and infrastructure.
This article is not intended to express an opinion on the Question or to sway voter opinion. Rather, the intent it to provide the facts and to convey the arguments that have been made by parties on both sides of the matter.
Proponents of Question 1
Reports indicate that this surtax would impact approximately 21,000 households in the Commonwealth, which makes up less than 1% of the population. Revenue generated would be used to make improvements to public schools, repair roadways and bridges, and make public transportation more reliable. Proponents of the amendment believe that its passing will advance racial and economic equity in the state.
Opponents of Question 1
Those in opposition of the Millionaire’s Tax point to the negative impact that it could have on attracting investors and carrying on business in the state. It may incentivize wealthy families to move their domicile out of state. They point out that the surtax would serve as a penalty to non-millionaire households during a year in which they have a capital gain related to a one-time event such as the sale of a family business or appreciated property. They also suggest that imposing a new tax at a time where the state is operating with a near $2 million surplus is unnecessary. In addition, there are concerns among skeptics that these funds will merely serve as a replacement to funds already allocated to education and transportation and those funds will be allocated elsewhere.
The Fall Out
Regardless of where you stand on the matter, should Question 1 pass on November 8th, impacted taxpayers will have just under two months to develop a strategy to mitigate the impact. Given the January 1, 2023 effective date, 2022 may become a year to attempt to accelerate income.