New Data Shows the Number of Millionaires and their Wealth Expands After Higher State Taxes on High-Income Earners: Revenue and Potential in MA, NY, RI, and WA
Washington D.C. – On April 28, the Institute for Policy Studies and the State Revenue Alliance released a timely, essential new report, “New Data Shows Wealth Expands After Higher State Taxes on High-Income Earners: Revenue and Potential in MA, NY, RI, and WA.”
Right now, Americans across the political divide in communities around the country are growing frustrated with rampant wealth inequality and the rising gap between enormous wealth that high-income individuals accumulate and the average paycheck that ordinary Americans earn. Over the past fifty years, the share of national income that goes to the working-class has been on a gradual decline and, in 2022, reached its lowest level since the Great Depression. Meanwhile, a wave of tax cuts at the state and federal level that overwhelmingly benefited the rich has fueled a new era of extreme inequality and wealth concentration.
One main proposed solution is for states to tax the ultra-wealthy and high-income earners at a higher rate and to use that revenue to fund vital programs and services that help communities thrive. This report provides a detailed analysis of the impact of higher state taxes on high-income earners in two states that have enacted such taxes – Massachusetts and Washington – and the potential impact of levying taxes on the highest earners and the wealthiest individuals in New York, and in Rhode Island, where a bill in the State Senate would add a 1% tax on worldwide wealth.
Key Findings:
Two years into Massachusetts’ millionaires’ tax and a higher tax rate on $250,000 in capital gains in Washington state shows that the millionaire class grew by 38.6 percent in Massachusetts and 46.9 percent in Washington, respectively. Their wealth grew by more than $580 billion in current dollars in Massachusetts and $748 billion in Washington state between 2022 and 2024.
In New York and Rhode Island, the total wealth of those with at least $1 million in assets grew as well. From 2010 to 2024, these four states saw a total wealth increase of about 200 percent, from $3.7 trillion to $11.2 trillion.
The top 0.7 percent of tax return filers in New York received a greater share of the gross adjusted income than the bottom 76 percent of filers in 2022.
A two percent wealth tax on individuals with a net worth of $50 million or more has the potential to raise $7.4 billion in Massachusetts, $21.9 billion in New York, $700 million in Rhode Island, and $8.2 billion in Washington.
“Both Massachusetts and Washington serve as critical test studies on the actual impact of fairly taxing the rich at the state level. Our report clearly demonstrates that taxing the ultra-wealthy at higher rates can raise vital revenue that state governments can then use to fund vital programs that benefit our communities and help reduce economic inequality,” said lead report author Omar Ocampo, researcher at the Institute for Policy Studies. “As our analysis shows, taxing high-income individuals at a higher rate is not disruptive and did not cause a mass exodus of millionaires from their respective states. In fact, those individuals were able to continue to grow their wealth, while also expanding state coffers so they can fund educational programs and improve transportation infrastructure. The revenue from these taxes can also be used to expand affordable housing and other vital services that enable working families in the United States to thrive.”
Key Policy Takeaways:
Wealth flight fears are misguided. The number of wealthy individuals and their cumulative wealth grew after the enactment of higher taxes on high earners in Massachusetts and a progressive capital gains tax on high-wealth Washingtonians.
Progressive taxation on million-dollar incomes in Massachusetts and capital gains in Washington succeeded in collecting additional revenue and are popular with voters.
A wealth tax that targets ultra-high net worth individuals – those with $50 million or more – puts a minor constraint on the rate of accumulation, but has the potential to raise significant revenues that can be used to support broad healthcare, economic, and educational programs that benefit all state residents.
“People want to live in places where their kids go to great schools, parents can easily get to work and everyone has opportunities to succeed. This new analysis confirms that when the rich pay their fair share of taxes, we all benefit – including the wealthy,” said State Revenue Alliance Executive Director Amber Wallin. “Tax policy is an important tool to fund the future that we all want and that our communities need. For years, we’ve had so-called experts claim that higher taxes will mean that wealthy people flee – it’s never been true, but these results show how wrong they were. When states raise revenue to make life better for everyone, we all win.”
“Shared prosperity is not a pipe dream. State governments have a key role to play in fairly taxing the ultra-wealthy to help close existing inequality gaps and ensure equal opportunities for all,” concluded Ocampo. “Massachusetts and Washington offer vital blueprints that demonstrate how taxing the rich fairly at the state level can raise revenue to fund critical programs and infrastructure. Our data shows that New York and Rhode Island could benefit from doing the same. The bottom line is: taxing the rich fairly works.”
View the full report and key findings: https://ips-dc.org/report-wealth-expands-after-higher-state-taxes-on-high-income-earners
Press contacts:
Olivia Alperstein, Institute for Policy Studies, (202) 704-9011, olivia@ips-dc.org
Jonathan Huskey, State Revenue Alliance, (571) 379-0534, jonathan@staterevenuealliance.org