Mass Exodus?

Last month, lawmakers in Massachusetts approved a constitutional amendment that will lead to the departure of many of the state’s wealthiest and most productive citizens. This move is likely to cause tax revenues to drop and real estate values to collapse.

The proposed change imposes a 4% surtax on residents with taxable income of $1 million or more. Currently, the state income tax rate is a flat 5.1%. So, when the measure comes into effect in 2019, the wealthiest taxpayers in Massachusetts will see their state income tax burden nearly double, which will cause many of them to move elsewhere.

Before the surtax comes into effect, it must be endorsed at a constitutional convention and approved by state voters. But judging by the lopsided votes for approval in both chambers of the legislature, the amendment being passed

Economists are virtually unanimous in their conclusion that higher tax rates discourage work, entrepreneurship, and capital formation, and increase poverty. Lower tax rates, on the other hand, encourage these desirable outcomes and reduce poverty.

Another argument for higher taxes is that by extracting more resources from the “rich,” governments can reduce inequality. President Obama has made this argument himself, in lobbying Congress for higher capital gains taxes. In an ABC interview, he explains: “I would look at raising the capital gains tax for purposes of fairness.”

Personally, I’d prefer a different outcome – one that increases wealth across the board. That means lower, not higher, taxes.

Which do you choose?

Reprinted with permission from Nestmann.com.

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