Accountants Warn of High-Income Residents Leaving Massachusetts to Avoid New Income Surtax
Accountants Warn of High-Income Residents Leaving Massachusetts Due to New Income Surtax
BOSTON ― Accountants in Massachusetts are raising concerns about high-income residents leaving the state to avoid the new income surtax, which has led to a surge in state tax revenues. According to a recent report by the Massachusetts Society of Certified Public Accountants, two-thirds of accounting professionals surveyed reported that at least one high-income client relocated out of Massachusetts in the last year.
The report also revealed that 90% of accounting professionals indicated that high-income clients are considering leaving Massachusetts, with 64% citing the 4% surtax on household income above $1 million per year as a factor in relocation decisions. The top three states to which Massachusetts residents are moving or considering moving are New Hampshire, Florida, and Texas, with many citing the tax burden imposed by Massachusetts as a significant factor in their decision to relocate.
Despite the concerns raised by accountants, Massachusetts has collected $1.84 billion from the voter-approved surtax on the state’s highest earners through the first nine months of fiscal 2024. This revenue is expected to easily surpass $2 billion per year, with Beacon Hill Democrats planning to invest the new revenue in public education and transportation.
While some individuals are leaving Massachusetts due to the new tax, Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University, noted that it’s not a “tidal wave” of residents fleeing the state. The tax is too new to gauge its impact on households just above the $1 million threshold versus those with significantly higher incomes.
In response to the concerns raised by accountants, the CPA group is calling on the Legislature to pass measures to make Massachusetts more competitive. These include decoupling from the federal limit on business-interest expense, raising the estate tax exemption to $5 million, and eliminating or reforming the “sting tax” imposed on larger S-corporations.
Overall, the debate over the new income surtax in Massachusetts continues, with accountants warning of potential consequences for the state’s revenue and competitiveness in the long term.