Massachusetts' millionaire tax, which Zohran Mamdani, a leading candidate for New York City mayor, points to as an example for taxing wealthy individuals, has yielded $3 billion more in revenue than anticipated, and has not caused notable wealthy residents to leave the state.
Over the past two years, since the state implemented a 4% surtax on incomes exceeding $1 million, this initiative has generated a $5.7 billion surplus. This additional revenue is being allocated to repair bridges, enhance literacy initiatives, and cover the transportation system's budget shortfall.
Unlike other states with graduated tax rates, the Massachusetts legislation is distinct in its focus on incomes surpassing one million dollars. This has angered corporate executives who argue it diminishes the state's competitive edge and deters affluent individuals. A number of them are even backing ballot initiatives aimed at reducing the state's income tax and capping annual tax collections to counteract the tax on millionaires.
While prominent figures like Robert Reynolds, formerly Putnam Investments' CEO, have relocated, instances of other well-known individuals or businesses leaving Massachusetts are less common compared to reports from New York, Chicago, and San Francisco. This situation might evolve as the IRS releases more data in the upcoming months, which could strengthen arguments for the tax or demonstrate its impact on a state's attractiveness to affluent residents.
Boston's Mayor Michelle Wu, described by Mamdani as an inspiration, recently chastised executives for voicing complaints about the tax, asserting that the area's skilled workforce and quality of life are more crucial for its economic strength.
Many high-income taxpayers are staying in the Boston area despite the tax hike.
“At the end of the day, I happen to believe it’s a phenomenal place to live,” said Sam Slater, a real estate developer who lives in the Boston suburb of Weston and pays the millionaire’s tax.
Slater, aged 41, has the freedom to reside anywhere; his real estate company possesses properties across the country. He undertakes frequent travel for his secondary occupation as a film producer, featuring prominent actors such as Mark Wahlberg. His investments encompass a share in the National Hockey League's Seattle Kraken. He even spent a portion of his youth in West Palm Beach, Florida, a favored retreat for affluent executives seeking to escape elevated taxes and cold weather.
But he’s staying put. His family has roots in the region, and they also like Boston’s culture, sports teams and seasons, Slater said.
Josh Isner, president of taser manufacturer Axon Enterprise Inc., said the millionaire’s tax makes it harder to recruit talent — particularly well-paid artificial intelligence specialists — to the Northeast hub the company opened in Boston last year. But the office is based in the city because “Boston breeds super-talented people,” he said earlier this year.
He lives in Massachusetts, rather than near the company’s headquarters in Scottsdale, Arizona, where income taxes are significantly lower. That’s largely because Massachusetts schools are so renowned, he said.
Massachusetts voters approved the surtax in 2022, with the levy applying to income that exceeds the $1 million threshold. Mamdani, who has maintained a large lead in polls ahead of New York’s Nov. 4 mayoral election, cited the Massachusetts policy as a success story when he floated his own millionaire’s tax proposal.
New York's situation might contrast with Massachusetts. The Empire State currently holds the dead last spot on the Tax Foundation's competitiveness index, featuring tax rates that are among the nation's highest. While Mamdani has targeted billionaires in his campaign, advocating for increased taxes on individuals and corporations to fund his progressive initiatives, Governor Kathy Hochul has stated she won't approve any tax hikes.
The millionaire's tax in Massachusetts, boosted by a strong stock market that increased the taxable wealth of affluent individuals, brought in an estimated $3 billion for the fiscal year concluding on June 30. This figure significantly surpassed the initial budget set by state legislators, as reported by The Massachusetts Department of Revenue. Collections in the preceding year also outperformed projections. To date, the surtax has yielded a total of $5.7 billion.
The extra cash has helped Governor Maura Healey ease the Massachusetts Bay Transportation Authority’s budget gap at a time when other states are slashing train and bus service. Healey’s now seeking to use $200 million of the money to address President Donald Trump’s cuts to research funding at Massachusetts institutions, one of the biggest threats to the state’s economy. The law that created the tax requires the funds to go toward education and transportation initiatives.
“People who thought this tax would backfire will have to concede now that it generates a substantial amount of additional revenue,” said Evan Horowitz, executive director of Tufts University’s Center for State Policy Analysis. Still, he estimates that for every dollar the millionaire’s tax brings in, the state is likely to lose 20 to 50 cents in income taxes from those who leave or adopt tax-avoidance strategies. Those indirect losses are hard to pinpoint, he said.
In 2022, the year preceding the implementation of the millionaire's tax and the latest period for which IRS data data is accessible, individuals earning more than $1 million accounted for 35% of all payments in Massachusetts.
Several prominent executives have relocated to states with lower taxes due to the surcharge. Reynolds, formerly the CEO of Putnam Investments, pointed to the combined impact of the millionaire's tax and the Massachusetts estate tax. He relocated to Florida in the past year, soon after Franklin Templeton's acquisition of Putnam, which is based in Boston.
The surtax “pushes you to make an earlier decision,” Reynolds said. The 73-year-old finance executive has been a fixture in Boston business circles for decades, having built Fidelity Investments’ 401(k) business before joining Putnam in 2008. He remains on the board of the Massachusetts Competitive Partnership, a collection of the state’s most powerful executives.
Business leaders continue to warn that even if wealthy residents didn’t abandon the state in droves in the tax’s first years, the departures will add up over time — and ultimately hurt Massachusetts more than it helps. They point out that $1 million incomes don’t go as far as they used to, particularly in a high-cost state like Massachusetts. The median home price in the greater Boston area surpassed $1 million in June before falling back under that threshold again.
“I haven’t been to one meeting in Boston since this passed where there haven’t been a number of people saying that they’re moving out of the state,” Reynolds said.
Other high-profile Massachusetts residents who have moved are reluctant to blame the tax. Steve Pagliuca, a longtime Bain Capital executive and Boston Celtics co-owner, has said his recent move to Florida was due to family reasons and his retirement from day-to-day work at Bain, not the tax. He recently offered to acquire the Connecticut Sun women’s professional basketball team and relocate it to Boston.
Without definitive figures, proponents and detractors of the wealth tax have both pointed to research backing their positions, even when that research doesn't present a complete picture.
A study from a progressive research group revealed that Massachusetts saw a 39% increase in millionaires between 2022 and 2024, leading the authors to deem the surtax an effective policy. The report's figures focused on wealth, not the income levels that dictate tax liability.
This year, a separate survey by a business advocacy organization revealed that tax policy was the primary driver for residents relocating. However, only a small fraction of those polled are affected by the millionaire's tax. The migration of residents to different states also occurred before the surtax was implemented and is attributable to other elements like elevated housing costs.
Slater, a real estate developer, has acquaintances who relocated from Massachusetts to destinations such as Florida and Texas, partly due to the millionaire's tax and for other factors. Although he doesn't intend to join them, he's worried that Massachusetts might raise the surcharge or introduce additional taxes down the line.
New increases have been on the table this year. Raise Up Massachusetts, the labor-backed group that proposed the millionaire’s tax, is now pushing to increase state duties on corporate foreign income. Healey also proposed new taxes on candy, prescription drugs and synthetic nicotine products — levies that the state legislature ultimately rejected.
Slater stated that he couldn't definitively say he'd remain in Massachusetts if the state imposes additional taxes on affluent residents.