The Massachusetts Fiscal Alliance issued the following statement today in response to a new Tax Foundation analysis debunking the Institute for Policy Studies’ (IPS) recent claim that higher state taxes on high earners lead to increased wealth and economic growth.

The Tax Foundation report may be found here.

“Once again, the data shows what common sense tells us: higher taxes suppress growth. The IPS report tries to spin the fact that incomes and net worth have increased across the country into a case for higher taxes. But the reality is simple: incomes rose everywhere between 2018 and 2022 due to broader national trends like inflation, federal stimulus, and a booming stock market. Massachusetts’ performance, when actually compared to other states, was mediocre at best,” said Paul Diego Craney, spokesperson for the Massachusetts Fiscal Alliance.

The Tax Foundation’s April 29 analysis exposes how the IPS study failed to provide any meaningful baseline comparisons. For example, IPS touts a 36 percent increase in the number of Massachusetts residents reporting $1 million or more in adjusted gross income between 2018 and 2022. What the report omits is that this increase lagged far behind the national average of 49 percent, and trailed significantly behind states like Texas (61%), Florida (77%), and Idaho (106%), all of which have significantly lower tax burdens than Massachusetts.

“Massachusetts didn’t even have the so-called ‘millionaire’s tax’ in effect during some of the years IPS used to support its argument,” noted Craney.

IPS also pointed to a 108 percent increase in the number of millionaire households in Massachusetts between 2010 and 2022. But again, this trend mirrors national averages, and the growth was largely driven by inflation and skyrocketing home values, not progressive tax policies. According to the Federal Reserve, millionaire households nationwide grew by 115 percent during the same period, drastically outpacing Massachusetts.

“Net worths soared because housing prices soared. A surge in real estate values doesn’t mean Massachusetts tax policy is working. It means more people are sitting on inflated home equity, something that happened in every state, regardless of tax rates. The fact that many middle class homeowners would become ensnared in the millionaire’s tax as their homes appreciated in value was a key argument against the surtax amendment and all this IPS study seems to be doing is validating that fear,” noted Craney.

In the period from 2022 to 2024, when Massachusetts’ new high-income surtax was actually in place, the data shows modest gains in millionaire households, but IPS omits national comparisons for that time period, because doing so would undermine their argument. The nationwide trend during those years included rising incomes, strong investment returns, and a sharp 20 percent increase in home sale prices.

“This report is more political fiction than economic analysis. Policymakers need to look past the spin and focus on honest, side-by-side comparisons. The facts are clear: when states raise taxes on high earners, many of them leave. The IPS study doesn’t disprove that—it just ignores it, offering Beacon Hill lawmakers a comforting narrative to cling to as Massachusetts’ economy continues to struggle under a culture that punishes success,” closed Craney.