By Christian M. Wade, Statehouse Reporter | September 30, 2024

BOSTON — Supporters and opponents of the so-called “millionaires tax” are still sparring over whether the 2-year-old law is driving businesses and wealthy households out of the state.

A recent report by the left-leaning policy group Massachusetts Budget and Policy Center says IRS data from July 2022 to July 2023 shows that Massachusetts has a lower rate of outmigration among high-income households earning $200,000 or more a year than that of low- and middle-income households.

The IRS data shows that Massachusetts added about 18,700 people to its population during that time frame, which includes a net gain from migration of 11,500 residents.

“Despite recurring warnings from some quarters, none of the available official data indicate that Massachusetts is in the midst of – or moving quickly toward – a crisis of population loss to other states,” wrote MassBudget’s Kurt Wise, the report’s author. “In short, the picture that can be drawn from available official data is inconsistent, though in any case, it is not one of crisis.”

The MassBudget report said the data suggests that state policies such as the “millionaires tax” – a voter approved 2022 law that set a 4% surtax on incomes above $1 million – have had little impact on the decisions of high-income households, arguing against cutting taxes for corporations or wealthy individuals.

“Cutting such taxes, however, would do nothing to help most people who choose to leave Massachusetts,” Wise wrote. “Instead, it would deprive the Commonwealth of much-needed revenue that otherwise could be used to address challenges that likely are a factor in some people’s decision to leave the state.”

But a newly formed business advocacy group is pushing back against claims that wealthy residents are not leaving the state in high numbers.

The Mass Opportunity Alliance, which includes the Massachusetts High Technology Council, Massachusetts Competitive Partnership and the Pioneer Institute, is criticizing MassBudget’s analysis, saying it contains “misleading data” that creates “false narratives” about the state’s outmigration demographics.

The group points to IRS data showing that while high earners accounted for only 22% of the net outmigration in 2022, they were responsible for the majority, or 55%, of the net loss in taxable income.

“The financial and demographic shifts are not just numbers; they represent real people and real economic potential leaving the state,” the alliance said. “The immediate effects of the monetary loss of income and a weakened talent pool in a state already facing labor shortages are troubling.”

Beacon Hill has wrangled over the issue of outmigration for several years amid warnings from pro-business groups and some economists that the state’s high tax burden and cost of doing business is hurting its competitiveness.

Gov. Maura Healey and legislative leaders have focused on boosting the state’s competitiveness in response to previous reports showing an exodus of people from the state in recent years. Healey argues that a lack of housing, among other factors, is affecting the state’s ability to attract and maintain businesses and families.

But an economic development bill that would set aside hundreds of millions of dollars in bonding and tax credits and reauthorize the state’s life sciences initiative to boost competitiveness has been stuck in a six-member committee since the July 31 end of formal legislative sessions.

The bill, a key plank of Healey’s first term agenda, was approved by the House and Senate but differences between the two bills still need to be worked out.

Overall, nearly 57,000 more people moved out of Massachusetts between July 2021 and July 2022, according to previously released U.S. Census data. That’s one of the highest rates of domestic migration in the nation.

The Bay State reached a peak of 7 million residents as of the 2020 Census, but has seen its overall population shrink in the last three years by about 50,000 people.