Boston Business Journal

New Study: ‘Millionaires Tax' Loophole Could Cost Mass. $200M-$600M

The state stands to lose between $200 million and $600 million in potential tax revenue if $1 million-earning couples who file federal taxes jointly choose to file separately at the state level to avoid the so-called “millionaires tax,” a new study suggests.

Approved by voters in November, the 4% surtax on all income topping $1 million is expected to bring in more than $1.4 billion in 2024 according to the state Department of Revenue. The funds are meant to go toward transportation and education spending.

But a study released Monday by the Massachusetts Budget and Policy Center says high-income couples could dodge the tax — cutting into that revenue by up to $600 million — by filing their state taxes separately. The progressive think tank called on lawmakers to close the loophole by requiring such couples — who typically benefit by filing federal taxes jointly — to file state taxes with the same status. 

“Voters in Massachusetts decided in November that people with the highest incomes should pay a larger share in taxes to support our infrastructure and schools," said Phineas Baxandall, policy director at MassBudget. “Paying their fair share doesn’t mean using loopholes to avoid their taxes. Thankfully, lots of other states have already shown how to close this loophole.”

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