Even as House Speaker Ronald Mariano has promised no new taxes “right now,” some Democrats are seeking to levy a so-called wealth tax by bumping up collections on certain types income in an effort to make the state’s richest residents pay their “fair share.”
A bill filed by Rep. Mike Connolly, D-Cambridge, proposes nearly doubling taxes on unearned income like long-term capital gains, dividends, and interest — which he said disproportionately pad the pockets of the wealthy — by hiking the rate from 5% to 9%.
“We’ve seen the headlines that billionaires in Massachusetts in particular, and people at highest end of the economic spectrum have been doing quite well and in many cases better than ever during the pandemic in huge contrast with those at the lower end of the economic spectrum where many people are truly in what you could call a depression,” said Connolly, who is co-sponsoring the bill with Sen. Joanne Comerford, D-Northampton.
The bill is similar to a failed amendment Connolly filed to the current-year budget. This time, the bill includes more exemptions for moderate and low income residents, who would continue to be taxed at 5%.
In addition to exemptions for seniors and people with disabilities, individuals earning less than $50,000 or couples filing jointly with less than $100,000 are also included.
The left-leaning Massachusetts Budget and Policy Center estimates the tax increase could raise north of $1.8 billion in new revenues annually. That’s on top of the roughly $1 billion the state already pulls in through the tax category.
Any cash raised over $1.9 billion would be used to replenish the state’s dwindling stabilization fund, which lawmakers leaned on heavily during the last budget cycle and are poised to draw from again.
But opponents say the bill could cause high earners to flee the state, disrupting the tax base.
“If Connolly is truly passionate about saving money for the rainy-day fund, then he should start by reducing spending not taxing people during a pandemic,” said Paul Diego Craney, spokesman for the Massachusetts Fiscal Alliance.
“If the Legislature wants to continue down this path of taxing people who are high earners and economic producers, at some point they will all move out of state and the tax base will decrease,” Craney said.