RIPEC may be non-partisan and pride itself on “objective research and analyses,” but that research and analyses are usually entrenched in outdated and largely discredited neoclassical economic theory.
Under such a view, low taxes
on the rich, a trickle-down economy, and a weak social safety net to discourage
freeloaders become the order of the day. RIPEC has in the past cherry-picked
data that support their beliefs, like the idea that raising the minimum wage
drives inflation or that taxing the rich causes them to flee the state.
What happens when you look at the numbers and gauge the
effects of tax increases recently enacted in Massachusetts and Washington is
that not only are these states collecting revenue needed to fund education,
health care, transportation, and more, but that revenue generated from taxes on
millionaires helps fund essential programs that expand economic opportunity for
all. This expanded opportunity helps low- and middle-income residents avoid
extreme poverty and increases the wealth of top earners and the number of
millionaires in the state, a virtuous cycle of
potential prosperity.
“This data directly rebuts those who claim higher taxes lead to mass migration of wealthy people,” said Jonathan Huskey, State Revenue Alliance’s Communications Director. “In reality, progressive taxes lead to better places to live and work—for wealthy people too.”
Here’s the Institute for Policy Studies and the State
Revenue Alliance press release:
On April 28, the Institute for Policy Studies and
the State Revenue Alliance released a timely, essential new
report, “New
Data Shows Wealth Expands After Higher State Taxes on High-Income Earners:
Revenue and Potential in MA, NY, RI, and WA.”
Right now, Americans across the political divide in
communities around the country are growing frustrated with rampant wealth
inequality and the rising gap between the enormous wealth that high-income
individuals accumulate and the average paycheck that ordinary Americans earn.
Over the past fifty years, the share of national income that goes to the
working class has been on a gradual decline and, in 2022, reached its lowest
level since the Great Depression. Meanwhile, a wave of tax cuts at the state and
federal level that overwhelmingly benefited the rich has fueled a new era of
extreme inequality and wealth concentration.
One main proposed solution is for states to tax the
ultra-wealthy and high-income earners at a higher rate and to use that revenue
to fund vital programs and services that help communities thrive. This report provides
a detailed analysis of the impact of higher state taxes on high-income earners
in two states that have enacted such taxes – Massachusetts and Washington – and
the potential impact of levying taxes on the highest earners and the wealthiest
individuals in Rhode Island, where a
bill in the State Senate would add a 1% tax on worldwide wealth.
Key Findings:
- Two
years into Massachusetts’s millionaires’ tax and a higher tax rate of
$250,000 in capital gains in Washington state show that the millionaire
class grew by 38.6 percent in Massachusetts and 46.9 percent in
Washington, respectively. Their wealth grew by over $580 billion in
current dollars in Massachusetts and $748 billion in Washington between
2022 and 2024.
- In New
York and Rhode Island, the total wealth of those with at least $1 million
in assets also grew. From 2010 to 2024, these four states saw a total
wealth increase of about 200 percent, from $3.7 trillion to $11.2
trillion.
- The
top 0.7 percent of tax return filers in New York received a greater share
of the gross adjusted income than the bottom 76 percent of filers in 2022.
A two percent wealth tax on individuals with a net worth of
$50 million or more can raise $7.4 billion in Massachusetts, $21.9 billion in
New York, $700 million in Rhode Island, and $8.2 billion in Washington.
“Both Massachusetts and Washington serve as critical test studies on the impact of fairly taxing the rich at the state level. Our report demonstrates that taxing the ultra-wealthy at higher rates can raise vital revenue that state governments can use to fund vital programs that benefit our communities and help reduce economic inequality,” said author Omar Ocampo, researcher at the Institute for Policy Studies.
“As our
analysis shows, taxing high-income individuals at a higher rate is not
disruptive and did not cause a mass exodus of millionaires from their
respective states. [Wealthy] individuals were able to continue to grow their
wealth while also expanding state coffers so that [those states] can fund
educational programs and improve transportation infrastructure. The revenue
from these taxes can also be used to expand affordable housing and other vital
services that enable working families in the United States to thrive.”
Key Policy Takeaways:
- Wealth
flight fears are misguided. The number of wealthy individuals and their
cumulative wealth grew after the enactment of higher taxes on high earners
in Massachusetts and a progressive capital gains tax on high-wealth
Washingtonians.
- Progressive
taxation on million-dollar incomes in Massachusetts and capital gains in
Washington succeeded in collecting additional revenue and are popular with
voters.
- A
wealth tax that targets ultra-high net worth individuals – those with $50
million or more – puts a minor constraint on the rate of accumulation, but
has the potential to raise significant revenues that can be used to
support broad healthcare, economic, and educational programs that benefit
all state residents.
“People want to live where their kids go to great schools, parents can easily get to work, and everyone has opportunities to succeed. This new analysis confirms that when the rich pay their fair share of taxes, we all benefit – including the wealthy,” said State Revenue Alliance Executive Director Amber Wallin.
“Tax policy is an important tool to fund the
future that we all want and that our communities need. For years, so-called
experts have claimed that higher taxes will mean that wealthy people flee –
it’s never been true. These results show how wrong they were. When states raise
revenue to make life better for everyone, we all win.”
“Shared prosperity is not a pipe dream. State governments
have a key role in fairly taxing the ultra-wealthy to help close existing
inequality gaps and ensure equal opportunities for all,” concluded Ocampo.
“Massachusetts and Washington offer vital blueprints demonstrating how taxing
the rich fairly at the state level can raise revenue to fund critical programs
and infrastructure. Our data shows that New York and Rhode Island could benefit
from doing the same. The bottom line is: Taxing the rich fairly works.”
View
the full report and key findings here.
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