Don’t Make Massachusetts ‘Taxachusetts’ Again

A proposed millionaire tax would accelerate the exodus of wealth to New Hampshire and Florida

By Jim Stergios. He is executive director of Pioneer Institute. Excerpts:

"many voters here remember the 1980s, when the state was derisively known around the country as “Taxachusetts.” A series of antitax popular initiatives in the 1980s and tax cuts enacted by Gov. William Weld in the 1990s reduced Massachusetts’ overall state and local tax burden considerably. Proposition 2½, which limits both the levels and growth of property taxes, was approved by voters in 1980 and remains sacrosanct. Among states with income taxes, Massachusetts’ flat 5% rate is on the low side. In neighboring Connecticut and New York, the highest earners pay 6.9% and 10.9% respectively.

What was Taxachusetts has become New England’s economic dynamo. Since the 2007-09 recession, wage and job growth in Massachusetts has outpaced the nation. Sustained economic growth produced a budget surplus exceeding $5 billion in the past fiscal year, which makes it doubly odd to ask voters to approve a tax hike now.

Connecticut’s economic arc illustrates the consequences of high taxes—especially in cold, expensive states that residents and businesses find easy to leave. In the late 1980s, Connecticut was a comparatively low-tax state, ranking 17th in the nation in overall tax burden.

Under Gov. Lowell Weicker, a liberal Republican turned independent, a flat income tax of 4.5% was introduced in the 1990s, and in subsequent decades Connecticut politicians couldn’t resist adding brackets and raising rates. Now the state’s overall tax burden is the second heaviest in the nation and the economic fallout has been disastrous. From 2008 to 2020, Connecticut ranked 49th in wage growth and 48th in job growth. By 2020, it was one of only three states where employment levels hadn’t recovered to pre-Great Recession levels.

Connecticut’s raft of tax hikes hasn’t translated into overflowing tax coffers. In the year after its 2015 income tax hikes, revenues generated by the state’s 100 largest taxpayers actually fell 45%. From 2008 to 2022, Connecticut’s state budget grew by 37%, while Massachusetts’s pro-growth policies fueled a doubling of the public fisc."