Activists and lawmakers are making another attempt at instituting the so-called “millionaires’ tax” as an amendment to the state constitution. However, this proposal is very deceiving and rather than target wealthy earners, will instead add a 4% surtax on many pass-through Massachusetts small businesses.
Question 1 will levy a 4% surcharge on all income over $1 million, increasing the rate from the current flat 5% income tax to 9%. This means a pass-through entity that reports profit as income, like a subchapter s-corporation, LLC, or partnership, could face the higher income tax rate. While most small businesses will most likely never report more than $1 million in profit annually, they may trigger the higher tax rate during a one-time event like the sale of the business, diminishing the owners’ retirement savings.
NFIB served as a plaintiff in a 2018 lawsuit to successfully remove this question from the ballot, but Beacon Hill lawmakers refiled the proposal. Despite record high revenue and billions of dollars in federal aid, lawmakers claim they need additional funds for transportation and education, although there is no guarantee the revenue raised from this tax will ever go to those two categories. For those interested in becoming involved in the effort to oppose the income tax surcharge, click here.