August 15, 2023

Progressive Taxation: The Path to Public Services

In 2022, Massachusetts made a bold move by introducing a 4% tax on earnings above $1 million. This tax is anticipated to funnel $1 billion into the state’s record 2024 fiscal budget of $56.2 billion. The result? Every public-school student in Massachusetts will now have access to free breakfast and lunch.

Similarly, states like Maine are contemplating progressive taxation as a means to bolster their public services. Imagine if Maine, inspired by Massachusetts, chose to adopt a 3% excise tax on its wealthiest residents. Given Maine’s economic profile and the income distribution of its residents, a conservative estimate might suggest that such a tax could generate upwards of $300 million annually. This hypothetical revenue is based on Maine’s different economic scale compared to Massachusetts and assumes that there is a substantial number of high earners to tap into.

If Maine were to follow in Massachusetts’ footsteps by allocating a significant portion of this revenue towards education, the state could potentially offer free meals in public schools, upgrade educational infrastructure, or even reduce student-teacher ratios by hiring more educators. With the remaining funds, Maine could address other pressing needs like transportation, healthcare, or sustainable energy projects.

WCVB has reported that Massachusetts has already earmarked $523 million for educational initiatives and reserved another $477 million for transportation from their new tax revenue. If Maine, with its projected $300 million from the hypothetical 3% tax, were to distribute funds similarly, nearly $158 million could go towards education, and around $142 million could support transportation and infrastructure projects.

On the national scene, President Joe Biden’s push for his billionaires’ tax proposal further underscores the growing momentum for progressive taxation. Unlike the income-driven taxes in Massachusetts and the hypothetical one in Maine, this national proposal targets wealth, specifically households valued over $100 million. With the recently enacted Inflation Reduction Act, corporations raking in over $1 billion are now subject to a 15% minimum tax. This shifting landscape suggests a new era where states, inspired by the likes of Massachusetts, could adopt progressive tax structures to better serve their citizens and address pressing public needs.