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Massachusetts’ ‘millionaires’ tax’ brought far more revenue than budgeted and funded education, committee hears
Summary
Witnesses told Vermont’s Ways & Means Committee that Massachusetts’ ballot-authorized ‘millionaires’ tax’ produced substantially more revenue than lawmakers initially budgeted and has been used for education and transportation programs; early data show no large exodus of high-income filers, though questions remain about investment-income mobility.
Phineas of the Massachusetts Budget and Policy Center told Vermont’s Ways & Means Committee on April 21 that Massachusetts’ ballot-authorized ‘millionaires’ tax’ generated far more revenue than the legislature first budgeted and has paid for visible education and transportation programs.
Phineas said the state budgeted roughly $1.0 billion from the new fair-share tax in the first full year but certified about $2.4 billion in collections; in the following year the legislature budgeted $1.3 billion and certified just over $3.0 billion. “It was a real kind of big surprise,” Phineas said, noting the money flows first into a dedicated fund and then into a reserve used for supplemental budgets.
The witness said the dedicated revenue has been used for measures that residents notice directly — reductions in school lunch and transit fees, expanded community college affordability and increased K–12 funding — and for capital accounts that reduced borrowing costs for infrastructure. “If you walk through [the governor’s investments] website, you will get a real taste of the things that have been made possible,” Phineas said.
Committee members asked whether Vermont should expect similar fiscal and demographic effects. Phineas cautioned that Massachusetts is a different economy and that the most recent IRS migration data cover 2022–23, which captures only part of the tax’s period. He also warned against overstating ‘tax flight’ using adjusted gross income (AGI) migration figures: a high-earner who moves may be replaced by another high earner, making AGI appear to leave the state even when taxable activity remains. “The AGI statistic is one that we really caution people not to see as symbolizing anything like tax flight,” he said.
Phineas also explained that Massachusetts changed its constitution via a ballot amendment to permit graduated tax rates after earlier prohibitions and that the ballot language specified funding for public education and transportation, naming roads, bridges and mass transit as examples.
Why it matters: Vermont lawmakers are weighing a proposal with graduated top rates and a special revenue designation. The Massachusetts example offers two clear takeaways for local legislators: the revenue from a targeted top-rate increase can be larger and more durable than early budgets expect, and spending dedicated to visible services (education, transit, capital investment) can shape local perception of outcomes.
What remains unresolved: Committee members pressed on several practical questions: how much of the revenue is ongoing operating money versus one-time spending (surpluses are placed into a reserve intended for one-time expenses), how many taxpayers are repeat millionaires versus one-time earners (Phineas said habitual millionaires are common in administrative data), and whether investment-income components of a Vermont proposal would raise additional avoidance or mobility risks.
The committee will continue hearings with accountants and trust-company representatives and will follow up on technical questions about fund rules and enforcement.
