State Imposed Millionaire's Tax

States are increasingly pursuing new streams of revenue to effectively operate and minimize debt. Some states have established or are pursuing a “millionaire’s tax” to minimize budget shortfalls and increase state revenue. The tax is primarily an income tax. California, Connecticut, New Jersey and New York have all established a such a tax. Massachusetts chose to not enact their version of the millionaire’s tax. In Arizona, a ballot measure is up for approval. Every state’s tax structure is different, but it boils down to taxing an individual which makes upward of $250,000 or more.

California’s millionaire tax was established in 2012, by Proposition 30. The proposition raised sales tax and created four high-income tax brackets for individuals with incomes exceeding $250,000 designed to last seven years. A recent San Francisco Chronicle article stated that since the passage of Proposition 30, 138 high-income individuals have moved out of the state. This was just 0.04 percent of the estimated 312,000 people subject to the increased tax.

California’s Proposition 30 Established Tax Bracket

Range of income in USD

Tax percentage before Proposition 30 

Tax percentage after Proposition 30

250,000-299,999.99

9.3

10.3

300,000-499,999.99

9.3

11.3

500,000-999,999.99

9.3 12.3

1,000,000+

10.3 13.3

 

 

 

 

 

 

 

New Jersey’s 2019 fiscal year budget includes a millionaire’s tax on individuals with an annual income of $1,000,000 or more. The income tax was raised to 10.75 percent from 8.97 percent and is projected to generate $765 million in additional gross income in 2019, according to New Jersey’s 2019 Budget Briefing.

Connecticut taxes joint filers with income of $1 million or more at 6.99 percent and joint filers with incomes of $500,000 to $1 million are taxed at 6.9 percent.

New York extended their millionaire’s tax in 2017, for two years under AB 3009-C. This bill dropped tax rates for the middle class but maintained the 8.82 percent tax rate for single filers earning more than $1 million and joint filers earning more than $2.1 million dollars.

In Arizona, the tax is packaged as the Invest in Education Act which uses the new tax to fund raises for teachers. The ballot measure recently submitted the required signatures to the secretary of state for inclusion on the November ballot. The measure would increase the tax rate from 4.54 percent to 8 percent for taxable income from $250,000 to $500,000 for individuals and from $500,000 to $1 million for families; and to 9 percent for taxable income above $500,000 for individuals and above $1 million for families. The tax hike is designed to fund raises for teachers following teacher strikes earlier this year.

Ultimately, every state is different, and each has their individual needs. Each state has experienced different results with a millionaire’s tax, yet more states are looking at them as a feasible option to supplement budget needs.