Massachusetts’s Millionaire Tax Didn’t Lead the Rich to Flee

By
Richard Solomon

Zohran Mamdani’s proposal for an additional 2% tax on incomes over $1 million has provoked gloomy prophecies of elite exodus. Yet a similar policy Massachusetts passed three years ago has not caused the rich to flee and has generated significant revenue.

Billionaire New Balance owner Jim Davis argued that the Massachusetts millionaire surtax would not address the state’s fiscal needs and would create tax flight. (Angela Rowlings / MediaNews Group / Boston Herald via Getty Images)

November 2025 marks the three-year anniversary of Massachusetts voters approving a 4 percent surtax on annual incomes above $1 million. What this means is that if you live in Massachusetts, you pay 5 percent of your annual income up to $1 million. If you make any more than that, you pay 9 percent on income above a $1 million. This is in addition to the state sales tax and local property taxes, which you pay directly as a homeowner or indirectly as a renter.

The “Fair Share” amendment has been a reference for New York City mayor-elect Zohran Mamdani, who has called for an additional 2 percent tax on city incomes over $1 million to fund his affordability agenda. Predictably, critics make gloomy prophecies of economic blight and elite exodus: Bill Ackman and twenty-six other billionaires spent big on Mamdani’s opponents, the Cato Institute called his tax plans “wishful thinking,” and Andrew Cuomo threatened to depart for Florida.

Massachusetts voters heard the same arguments in 2022. Spearheaded by Patriots owner Robert Kraft, New Balance’s Jim Davis, and Boston investment firm CrossHarbor Capital Partners, the opposition argued that Fair Share would not address the state’s fiscal needs; it would create tax flight and punish homeowners selling on the market. Three years on, what are the effects of the millionaire tax? The evidence is that Fair Share revenue has exceeded expectations: it’s repaired bridges, funded bus routes, hired teachers, and made community college and school meals available to all. There has been no significant outmigration of the wealthy. In fact, the number of millionaires by net worth has increased by over 30 percent, and the outward tide of nonrich, young workers has slowed.

Making Massachusetts Nice

Since 2022, Massachusetts generated $5.7 billion from the tax — $2.46 billion the first full fiscal year and $2.99 billion the second — doubling initial forecasts. (These include forecasts by the Department of Revenue, “fiscal responsibility” skeptics, and the amendment’s own advocates.) For FY2025, Fair Share revenue made up about 5 percent of the total state budget. Revenue has been spent on education and transport infrastructure, as required by the amendment. Early evidence is that Massachusetts is using the funds to supplement, not offset its education spending:

Figure 1: Massachusetts education funding by year, adjusted for inflation. Source: Massachusetts State Legislature.

The share might appear small, but the results are impressive. With Fair Share funds, Massachusetts has maintained pandemic-era funding levels for childcare, expanded pre-K programs, and invested $20 million in early literacy. Breakfast and lunch were made free for all Massachusetts school children starting in 2023. Another $160 million has gone toward school building improvements. Fair Share has made tuition-free community college universal for all Massachusetts residents and expanded financial aid through the University of Massachusetts system. The state is now considering $200 million of Fair Share funds to backfill federal cuts to research and innovation at public universities.

Fair Share has strengthened transit. According to the governor, $250 million of Fair Share revenue has been allocated to the Commonwealth Transportation Fund, expanding its bond capacity by $1.1 billion. Such financing has been used to replace seventy-six kilometers of urban commuter rail, remove two-hundred-plus speed restrictions, repair twenty bridges, and maintain rural roads. Another $345 million has supported the Massachusetts Bay Transportation Authority, used to expand ferry services, train machinists, and pilot fare-free programs. Regional transit authorities received $200 million in Fair Share funds, which are used to make buses free, expand operating hours, and hire drivers.

Figure 2: Fair Share revenue allocation by expenditure category

Thanks in part to programs funded by Fair Share, Massachusetts has stemmed the tide of departing working families and young people.

The Millionaire Homestay

After two and a half budget cycles, Fair Share revenue attests to the fact that Bay State millionaires are staying and paying. Internal Revenue Service (IRS) tax returns reveal the number of filers reporting adjusted gross incomes above $1 million has generally climbed, although as of writing the IRS hasn’t released individual filing data from 2023:

Figure 3: Number of IRS tax returns in Massachusetts with an adjusted gross income of $1-million-plus (2012–2022). Source: IRS Statistics of Income program.

So what about after 2022? To get around the income data availability issue, one study in April examined proprietary data on net worth from Wealth-X. It found the Massachusetts population reporting net worth above $1 million has grown 39 percent from 441,610 individuals to 612,109 in the past three years. The number of residents above $50 million in wealth has grown 35 percent from 1,954 to 2,642 individuals. Finally, the number of billionaires in Massachusetts on the Forbes 400 list has climbed from seven to nine between 2022 and 2025.

These data clash with the dire protestations of the wealthy themselves and their popular image as rootless jet-setters anxious to move, gravity-like, to the lowest tax environment. Have we misjudged them? As economic sociologist Cristobal Young explains, much of wealth accumulation is still rooted in place and insider advantage, while a host of sociological considerations tie wealthy people down during the peak income years. (A New England billionaire might dream of living on an island in the Florida Keys or buying a fiefdom in Alaska, but that doesn’t mean his spouse or children or friends want to go live there with him. The highest-paid lawyers, surgeons, and consultants forge their reputations and client base in particular cities or regions. To move to Florida means walking away from their professional networks or leaving the most prestigious jobs in their field.)

It is the young and lower-income who are much more likely to move:

Figure 5: Young et al. (2016), estimates of migration rates by income level, 1999 to 2011. Source: US Department of the Treasury, IRS microdata, 1 percent sample of all tax filers (N = 24 million) and 100 percent sample of people making $1 million or more (N = 45 million).

Moreover, according to Young’s study, the majority of movers above the $100,000 annual income mark are departing to states with the same or higher tax burden.

The Future of Millionaire Taxes

Fair Share has been a fiscal success in Massachusetts, but the future of using state income taxes to reform our way into social democratic paradise is still unclear. For one, revenue generated is small compared to sales taxes. It will not offset $1 trillion in federal tax cuts to the wealthiest Americans. Massachusetts’s 7 percent top marginal rate is lower than New Jersey’s (10.75 percent), New York’s (10.9 percent), and California’s (13.3 percent). The state tax burden, like that of most states, is still regressive: the middle 60 percent of families on the income distribution pay about 9.7 percent of their annual budget in state taxes while the richest 1 percent pay 8.9 percent. This happens because the rich can afford to save their incomes while those lower down have to spend a higher portion of their budgets in the real economy, catching consumption taxes in the process.

Figure 6: State tax burden as a share of family income by position in the income distribution, 2025.

On a political level, passing Fair Share was a Herculean effort that squeaked by at 52 percent yes vote, even in deep-blue Massachusetts. This might present a challenge for those seeking to replicate the strategy elsewhere. I spoke with Jonathan Cohn, policy director at Progressive Mass, as well as Enid Eckstein, who served on the steering committee for the organization Raise Up that led the fight for Fair Share. According to them, Raise Up created a winning coalition for the amendment, backed by service worker, building, and teacher unions, and even the AFL-CIO. The campaign survived a Supreme Court objection by finding a runaround through constitutional convention. Raise Up came out early on TV ads, canvassed nearly a million doors, and had disciplined messaging on earmarking funds and the home-selling issue.

The wealthy were caught off guard by the amendment’s passage. Cohn told me that right-wing interests, having realized that repealing the millionaire surtax is a losing battle, are now collecting signatures to reduce state income taxes as a whole. According to Eckstein, the task ahead is not just staving off relapse to a more regressive tax structure but extending progressive gains to a corporate fair share tax on excess profits concealed offshore. Finally, as the People’s Policy Project has argued, further inroads against inequality and poverty will require plans to socialize capital income and fund generous welfare states.