Massachusetts Proposes "Millionaire Tax"

Massachusetts Proposes "Millionaire Tax"

If you are a high income earner who lives in Massachusetts, you may soon be subject to a 4 percent surtax on taxable income in excess of $1 million. That will come on top of the state's current 5.1 percent personal income tax. That surtax is at the heart of a proposed constitutional amendment that has already been approved by both houses of the Commonwealth's legislature.

It won't happen immediately, if at all. The proposed amendment must be approved at a constitutional convention, then presented to voters, probably in November 2018. If passed by referendum vote, the tax would take effect for tax years starting in 2019.

No matter which side of the political debate you are on, it is important that you be aware of the potential surtax and make plans now to prepare for paying an effective tax rate of 9.1 percent on all income over $1 million.

One option is to move out of Massachusetts to a state with lower income tax rates, or no income tax. That might be a bit drastic. More practical courses of action may be to accelerate income into the 2017 and 2018 tax years, or to establish multiple trusts to keep income under $1 million.

There is no guarantee that this proposed surtax on high income earners will become law. There are several hurdles it must clear before that occurs. But it should be on your radar for planning purposes.

For more information on this or other tax topics, please contact Gray, Gray & Gray's Tax Department at (781) 407-0300.

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