AUGUSTA, Maine – State income tax increases on high-income residents can raise substantial revenues for investments in people and communities and are more likely to boost long-term productivity than harm short-term economic growth, according to a new report from the Center on Budget and Policy Priorities (CBPP).
Of the eight states that have enacted these “millionaires’ taxes” since 2000, six states grew as fast or faster economically than their neighbors. Most of these states also experienced similar or better growth in jobs and average individual income.
“Millionaires’ taxes are not harming state economies. Opponents of this policy rely on unproven claims and myths. Higher income tax rates at the top can help states invest in their futures without compromising job creation or economic growth,” said CBPP Senior Policy Analyst and report author Wesley Tharpe.
The facts about state millionaires’ taxes:
- States have increased their top income tax rates without harming their economies.
- Over the last 18 years, 15 of the 20 major studies examining states’ income taxes found little to no effect on their economic growth.
- Millionaire tax flight is uncommon and, therefore, does not weaken state economies. Less than three percent of millionaire households moved to new states in a given year.
- High-income tax increases can help Maine afford investments that decrease racial inequities, build economic opportunity and spur growth, such as high-quality education, improved support for low-income families and better roads and other infrastructure.
Even modest rate increases in Maine could generate the revenue necessary to fund the investments that build the foundation for an inclusive, thriving economy.
As part of its blueprint for shared growth and opportunity, Maine Center for Economic Policy’s Prosperity Budget proposes rate increases on the top earners in the state, with a new 9.5 percent tax on income above $200,000 and a 10.5 percent tax on income above $500,000 for married households. For single households, the new tax rates apply to income above $100,000 and $250,000, respectively.
These new tax rates would affect just 4 percent of tax filers, representing the highest income earners in the state, but would generate $308 million in revenue over the next biennium.
“Tax increases on Maine’s top earners would allow us to make meaningful investments in our communities. That’s the best pro-growth strategy that we have,” said MECEP Executive Director Garrett Martin.