Massachusetts loses $4.2 bn as millionaires vote with their feet
Massachusetts shed $4.2 billion in adjusted gross income last year, the IRS confirms, and the exodus is no longer a pandemic blip—it is a structural haemorrhage. The 2023 figure, 8 % higher than 2022, is the first full tax year under the state’s new 4 % “millionaire surtax”. The rich are leaving more slowly, but they are taking more with them.
The surtax that paid for six trains and triggered a gilded dash
Voters approved the levy in a 2022 ballot measure, seduced by promises of better trains and classrooms. The surtax has since pumped $6 billion into Beacon Hill coffers and, in the current fiscal year alone, is running 19 % ahead of projections. Progressive groups call that proof the rich are staying put. The IRS data sheet calls it something else: 70 % of the lost income came from taxpayers earning $200 k-plus, up from 55 % the year before.
Florida and zero-income-tax New Hampshire remain the preferred escape pods. Yet the pattern is shifting: fewer overall departures, but each departing return carries a fatter wallet. Net out-migration of tax returns dropped 36 % between 2022 and 2023; the average income per leaver jumped 28 %.
What the governor won’t tweet
Governor Maura Healey dismisses talk of competitiveness loss as “ partisan fear-mongering” and warns that rolling back the surtax would punch a $1.3 billion hole in the budget. Business-backed ballot committees disagree. One proposal would cut the flat rate to 4 % for everyone; another would cap annual revenue growth, starving future surtaxes oxygen.
Jim Stergios at the Pioneer Institute puts it bluntly: “We are trying to finance a social-democratic wish list on a tax base that is literally moving south.” His modelling shows Massachusetts could forfeit another $9 billion in capital income over the next five years if current exit velocity holds.
California and washington watch from the cheap seats
California, mulling a wealth tax, and Washington, which just enacted its own millionaire levy, are both tracking the Bay State experiment. So far Massachusetts has avoided headline-grabbing exits like Elon Musk’s Tesla bolt to Texas. The quieter danger is subtler: each retiring partner, each biotech founder who domiciles elsewhere, erodes the compounding effect of local reinvestment.
The state’s biotech corridor around Kendall Square still glitters, but leases are shortening. One VC who moved his family office to Miami last winter told me: “I still fund Boston startups; I just don’t fund Boston potholes.” That sentiment, repeated often enough, turns into campaign donations for the tax-repeal drives due on the 2026 ballot.
The bottom line
Massachusetts collected $1.3 billion from 29,000 millionaire returns in fiscal 2026. It lost 7,000 of those same millionaires the previous year. Arithmetic rarely lies; politics does. The surtax is revenue-positive today. Whether it remains voter-proof tomorrow depends on how many more U-Hauls cross the state line before the next referendum—and whether the roads they leave behind are finally paved with gold, or just good intentions.