Society issued an official statement on proposed Constitutional amendment
With almost three-quarters of its members who responded to a survey saying they will be even more likely to recommend that their clients consider changing their state of residence if Question 1 passes, the Massachusetts Society of CPAs on Monday made its opposition to the proposed Constitutional amendment for a surtax on income above $1 million a year official.
“Our members likely have different beliefs about whether, conceptually, a graduated income tax is a good idea or not, but the approach laid out in Q1 is unacceptable. Tax rates and thresholds have no business in the state constitution and tax policy should be based on sound principles, not marketing approaches,” the organization, which counts 11,000 people as members, said in a statement.
“Proponents of the ballot question claim that the tax increase will only impact ‘those who can afford it’ and that the increase will be used to fund education and transportation. Neither one of these precepts is true. Many of the ‘millionaires’ that will be impacted are one-time millionaires who are selling small businesses or homes they have invested in over a lifetime and were counting on to fund their retirements.”
Unintended consequences would take years to change
The Mass. Society of CPAs cautioned that enshrining tax policy in the Constitution means that there is no fast way to make changes if unintended consequences emerge; it would take four years to amend the Constitution again.
“There are many worthy discussions necessary to make the Massachusetts tax code fairer and more equitable for individuals and businesses across the Commonwealth. Question 1 does not accomplish that endeavor,” the organization said.
MassCPAs said that 73 percent of its members who responded to a recent survey said they will be more likely to encourage clients to establish residency outside Massachusetts if the surtax question passes next month.
Effect of Question 1 on Massachusetts insurance agency sales
Agency Checklists asked Mike Ryan, a highly regarded agency broker about the effect of Question 1 on Massachusetts agency sales. Here is what he had to say:
“Question 1 would definitely have a substantial negative tax impact on the sale of virtually all independent agencies in Massachusetts. Most agency sales result in capital gains in excess of $1 Million. That gain combined with the agency owners’ other income will subject them to an additional 4% (9% in total) tax on their income over $1 Million in that year.
A change in residency to another state will not avoid the Massachusetts income taxes. Despite the fact that the increase in agency value occurred over many years the gain is all taxed in the year of sale.”
