The Wealth Taxes Already Reshaping State Budgets Make Mamdani’s Plan Seem Tame
In November 2022, Massachusetts voters approved an amendment to the state’s constitution that levies an annual 4% surtax on those reporting an income of $1 million or more. The proceeds are earmarked for education and transportation.
The wealth tax passed narrowly, with just 52% of the vote after a fierce, richly-funded opposition campaign waged by a Who’s Who coalition of mega-wealthy donors. Opponents argued that the rich would simply move themselves and their money to a more tax friendly state, shrinking, not adding to the Massachusetts tax base.
Three years later, more than $5 billion has been collected through the surtax, far exceeding expectations. Already the wealth tax is financing university scholarships, school meals for young children, teacher hiring, bridge repairs, and necessary road and rail system improvements.
As for “capital flight,” there are more millionaires in Massachusetts than before the wealth tax was enacted. Their net worth has increased by 30%.
State Wealth Tax Outcomes
Washington State, which has no state income tax, took a different approach to taxing wealth. In 2021, the state passed a 7% tax on capital gains over $250,000. The tax has raised over $1.2 billion, which has been used to expand public investment in education. As in Massachusetts, the number of wealthy, and the value of their assets, has substantially increased.
Minnesota, in 2024, began taxing individuals, estates, and trusts 1% on their net investment income exceeding $1 million. The state defines net investment income as interest, dividends, capital gains, and rental and royalty income.
Michigan has a flat income tax rate of 4.25%, which means billionaires and teachers pay the same rate. Next year, state voters will decide a ballot initiative that would tax individuals earning over $500,000 and couples earning over $1 million a surcharge of 5%. That would add an estimated $1.7 billion in extra school funding revenue annually.
Interested in more information about the growing appetite for wealth taxes? Check out these reports:
Growing Support for Wealth Taxes
Against this backdrop, New York mayor-elect Zohan Mamdani’s advocacy for a 2% state wealth tax surcharge to finance better education and transportation doesn’t sound crazy or communist, does it? In comparison, it feels downright modest.
As for all the billionaires moving to no-state-income-tax Florida so they can hoard money, the evidence elsewhere is that most who are rich enough to pay a few percent more for public services have financial and social roots too deep to pull up over what to them is chump change.
More likely than a flight of the wealthy is that more states will note the experience of trailblazers like Massachusetts, Washington and Minnesota and consider following their lead with their own forms of wealth taxes.
A National Wealth Tax Debate Resurfaces
In fact, I wouldn’t be surprised if one of the key issues in the 2028 presidential campaign, or maybe even in the 2026 midterms, isn’t a reprise of Elizabeth Warren’s call for a national wealth tax. Remember her proposal from her 2020 presidential campaign?
She called for a 2-cent tax on every dollar of a person’s net worth over $50 million and a 6-cent tax on every dollar of net worth over $1 billion. Warren estimated that these surtaxes would affect only 75,000 households, but would raise $3.75 trillion over ten years. Enough money to pay for:
Universal child care and Pre-K
Tuition-free technical school and two- and four-year public college
Canceling student loan debt for 95% of people who have it, and
Financing Medicare for All
Six years after Warren first proposed it, there are so many more billionaires and multi-millionaires, I’d guess her proposal would now pay for all of the above, plus wipe out the annual national debt.
The wealthy would be wise not to resist paying Mamdani’s two per cent tax. Given the current pitchforks political climate and the growing rage over inequality, that may be the best deal they will ever get.
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Comments? Criticism? Contact Joe Rothstein at jrothstein@rothstein.net
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What happens when a fun-loving, charismatic, reform-minded Mexican-American billionairess becomes president of the United States and strikes fear in the pocketbooks of a cabal of the rich and powerful?