Taxachusetts Redux: The Bay State Takes a Left Turn

For many years, despite its reputation as a liberal bastion once known as Taxachusetts, Massachusetts has been a well-run state, reasonably hospitable to business and entrepreneurs.This was due to a succession of Republican governors dating back to William Weld. Basically Massachusetts voters had the good sense to keep competent governance at home while indulging their passion for virtue signaling by, say, exporting Elizabeth Warren to Washington.All that is about to change. Massachusetts has just elected a liberal Democrat, Maura Healy, to replace its moderate Republican governor, Charlie Baker.Since Governor-elect Healy hasn’t done anything yet, let’s give her the benefit of the doubt. Maybe she won’t try to emulate Governor Gavin Newsom, who has made a career out of driving businesses and congressional seats out of California. He’s done this with public-employee-union inspired taxes, regulations, and substandard public education. Sadly, in the same election which produced Governor Healy, the voters also passed Prop 1, which adds a four percent surcharge to income taxes for millionaires. This doesn’t quite reach the levels of California or New York, but it’s getting close. And it sends a signal to anyone thinking of starting or expanding a business in Massachusetts to think twice. Governor DeSantis was already doing quite well in Florida (despite President Trump’s bizarre statement calling him an “average” governor) and this new Massachusetts “revenue raiser” will only help. A Florida real estate rag sarcastically named Andrew Cuomo, then New York Governor, Florida realtor of the year. Looks like Massachusetts may want to compete for this award. Everyone knows the old saw about doing the same thing over and expecting a different outcome. In this case the same thing is emulating the tax policies of New York and California. In the latest congressional reapportionment both New York and California lost congressional seats, and attendant electoral votes.For California it was the first time in its history. The biggest beneficiaries of this interstate migration were the no-income-tax states of Texas and Florida, which picked up between them three congressional seats. Perhaps these population shifts were just random, unrelated to tax policies. Why, though, would Massachusetts want to test that proposition? For years Massachusetts has had a flat income tax of around five percent. While not ideal in the competition for business and population, it was benign enough that few wanted to go through the brain damage of redomiciling. This is particularly true of those businessmen and professionals who were educated at Boston and wanted to spend the rest of their lives at Harvard or MIT.That might be changed, though, by a tax rate of 9 percent on income, defined to include any capital gains on your company stock or your house. At the margin it is certainly unhelpful to Massachusetts’ aspirations to be a magnet for population or business, particularly small business, the major engine of job creation. Combine a nine percent income and capital gains tax rate with an estate tax of 16 percent, and Massachusetts may well be on its way to rebranding itself as Taxachusetts.

Taxachusetts Redux: The Bay State Takes a Left Turn

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