by: Ryan J. Stevens and John C. Zang

DMGS Article Highlights

  • New Jersey recently joined California, New York, and Washington, D.C., implementing a “millionaires’ tax”
  • Measures to implement a millionaire’s tax range from legislation to ballot measures to constitutional amendments

New Jersey recently joined California, New York, and Washington, D.C., in implementing “millionaires’ taxes.”  “Millionaires’ Tax” is a general term used to describe tax provisions specifically designed to collect revenue from households earning greater than $1,000,000 in taxable income each year.  Proponents view increased marginal tax rates upon the highest income levels as a critical way to fund essential services, such as education, transportation, and health care.  Opponents argue such tax changes could incentivize individuals and businesses to move to other states with lower or no income tax rates.  In the middle of the COVID-19 pandemic, could such a tax change help recover public coffers drained by states’ emergency responses, or will it create an additional burden on the wealthy in the middle of an economic recession?

As the Garden State begins to implement their millionaire’s tax, have other states implemented similar tax laws?  Are lawmakers in other states considering similar measures?  Lawmakers in nine states, home to nearly half of the nation’s millionaires, are calling for various forms of marginal tax rate increases on the highest income brackets.

Digital Collage by Alana Burman

New Jersey

In late September, New Jersey Governor Phil Murphy signed a revised, $32.7 billion budget.  The budget includes $703 million in additional tax revenue, $1.7 billion in additional spending, and $4.5 billion in additional borrowing.  Notably, Governor Murphy’s millionaires’ tax is included in the final budget.  Currently, the state taxes income over $5 million at only a 10.75% marginal tax rate.  The new millionaire’s tax would apply that rate to taxable income greater than $1 million.  Currently, taxable income between $1 million and $5 million is taxed at only 8.97%.  Murphy’s predecessor, Chris Christie, vetoed similar efforts multiple times.

Murphy faced resistance from both Republican and Democratic leaders on the millionaire’s tax.  Legislators made a deal when Murphy agreed to support a new tax-relief program that calls for tax rebates.  The budget bill’s fiscal note anticipates the millionaire’s tax will generate $390 million in annual revenue for FY 2021.  This will increase in FY 2022 and FY 2023 to between $390 million to $450 million.

However, the new rebate program, expected to cost about $300 million annually, will offset this.  Approximately 800,000 qualified taxpayers will be eligible for the new rebate program, with most receiving a maximum rebate of $500.  Others will receive a partial rebate, depending on income levels.  To be eligible for the rebate, the taxpayer must be a resident of New Jersey, have at least one dependent child, have a gross income tax liability greater than zero, and have gross income less than:

  • $150,000 if married and filing jointly, filing as head of household, or filing as a surviving spouse; or
  • $75,000 if married and filing separately or individuals filing as a single taxpayer


Last year, the California Assembly passed AB 1253, which would have increased high-income tax rates.  California’s personal income tax rates range between 1% and 12.3%, depending on adjusted taxable income and filing type.  In 2012, California voters approved Proposition 30, which temporarily increased the highest tax rates through 2019; in 2016, voters extended those changes through 2030.  In 2004, California voters also approved Proposition 63, which raised the marginal tax rate on taxable income of $1 million or more by 1%.  The state allocates the revenue generated from that rate change toward the provision of mental health care.

AB 1253 would have increased graduated fixed tax rates for annual income exceeding $1 million to provide more funds for state government services.  Under the bill, annual taxable income between $1 million and $2 million would have been assessed an additional 1%, income between $2 million and $5 million an additional 2%, and income of $5 million and more an additional 3.5%.

The bill analysis for AB 1253 reported, “70% of Californians agreed that it’s time for millionaires to pay their fair share.”  Specifically, the bill author hopes the revenue generated would help California address the economic recession caused by the COVID-19 pandemic.  The analysis also finds that the bill would raise California’s wealthiest taxpayers’ tax rate by 3.5%.  Opponents argued that those impacted by the new tax could move out of state and oppose the way the tax considers marital filing status.  The bill would have applied to taxpayers regardless of filing status; two unmarried individuals or married individuals filing separate returns with $750,000 in annual income would not have to pay an additional tax.  However, they would have to pay the tax under the bill if they were married and filed a joint return.  The state Senate did not take AB 1253 up during the latest session.

This fall, California voters will vote on Proposition 15, which calls for increasing property taxes on commercial properties worth more than $3 million and providing the revenue ($6.5 billion to $11.5 billion) in new funding to local governments and schools.  Governor Gavin Newsom and the California Teachers Association support the measure, while the California Chamber of Commerce, California Retailers Association, and California Business RoundTable oppose it.  In polls, roughly half of Californian voters currently support the measure.


Proponents for a millionaire’s tax in Massachusetts sought to get the issue on the 2018 ballot through the petition process, gathering 150,000 signatures.  The ballot question called for implementing a 4% surtax on taxable income of over $1 million, earmarking the revenue for schools and public transportation.  The Supreme Judicial Court of Massachusetts struck down the issue, arguing the ballot question did not offer a fair choice for voters who might support the tax increase, but not on which programs to spend it.

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Massachusetts lawmakers are taking a different approach to the issue, as amendments need not be legally related, as ballot measures are required to be.  Lawmakers proposed H. 86 and S. 16, a conditional amendment, which passed in June 2019, by a total vote of 147-48.  The amendment must pass with the majority vote of the state House and Senate in two consecutive sessions; the Legislature will consider it again in the 2021-2022 legislative session.  If the amendment passes again, it will go to the ballot for voters to decide in November of 2022.

The measure would amend the state Constitution to provide resources for education and transportation through a 4% increase in tax on annual income over $1 million, adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets.  If approved by voters, the amendment would take effect for all tax years beginning on or after January 1, 2023.  The Department of Revenue in Massachusetts estimates the millionaire’s tax would raise an additional $1.9 billion annually from 19,600 tax filers.


In Maryland, legislators introduced a 6.25% millionaire’s tax in 2009 to raise $106 million.  The tax expired in 2010.  Now, some lawmakers are looking to reinstate increased rates on the highest marginal income.  In early 2020, a group of progressive state lawmakers introduced a package of bills to bring “more equity to Maryland’s tax code” and generate over $1 billion in annual state revenue to fund education-related reforms.

The package of bills would:

  • Require combined reporting for multi-state corporations based on the amount of business they conduct in Maryland;
  • Eliminate some tax credit and subsidy programs;
  • Reset the state’s estate tax exemption limit at $1 million instead of the current $5 million; and
  • Restructure the state’s income tax brackets to lower rates for those earning less than the state median and increase the tax bracket to millionaires to 7%.

Lawmakers introduced HB 1190 in the 2020 session to alter the personal income tax by establishing new tax brackets and increasing the top marginal tax rate from 5.75% to 7%.  Current Maryland law assesses only a 5.75 tax rate for annual taxable income:

  • Over $250,000 for those filing as single, dependent, or married filing separate
  • Over $300,000 for those filing as joint, head of household, or widower

HB 1190 would alter all marginal income tax rates, including creating a 7% rate on annual earnings greater than $1 million.  The fiscal note for HB 1190 anticipates state revenues will increase by a net of $284.2 million in FY 2021, which will increase to $668.4 million in FY 2025.


The most notable recent federal tax legislation affecting American millionaires continues to be the Tax Cuts & Jobs Act of 2017 (TCJA).  Under the TCJA, the marginal tax rate for millionaires was substantially reduced relative to other tax brackets.  According to the Joint Committee on Taxation, roughly 82% of the benefits of the TCJA went to people making $1M or more annually in 2020.  The TCJA’s tax effect on millionaires alone increased the federal deficit by over $70B.  Both parties agreed in the CARES Act to temporarily suspend some of the TCJA tax advantages for millionaires, but Congressional calls for more improvements to marginal tax rates persist.


Former Vice President Joe Biden’s tax platform advocates returning the top individual income tax rate for taxable income above $400,000 from only 37% under current law to the pre-TCJA level of 39.6%.  Under the TCJA, the rate is already scheduled to revert in 2026; Biden’s plan would accelerate this change.  Biden’s platform also includes a 12.4% Social Security payroll tax on income earned above $400,000, evenly split between employers and employees.  Specifically on annual taxable income above $1 million, Biden’s platform includes a proposal to tax long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 percent and eliminate the step-up in basis for capital gains taxation.  For filers earning more than $400,000 in taxable income annually, Biden is also advocating for a 28% value limit on the tax benefit of itemized deductions and a phase out of the qualified business income deduction.

Biden’s plan would also expand the Earned Income Tax Credit for childless workers aged 65+, provide renewable-energy-related tax credits to individuals, expands the Child and Dependent Care Tax Credit from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents), and increases the maximum reimbursement rate from 35 percent to 50 percent.

For 2021 and if economic conditions require, Biden would increase the Child Tax Credit (CTC) from a maximum value of $2,000 to $3,000 for children 17 or younger, while providing a $600 bonus credit for children under 6.  Biden would also make the CTC fully refundable, removing the $2,500 reimbursement threshold and 15 percent phase-in rate.

Biden would also reestablish the First-Time Homebuyers’ Tax Credit, providing up to $15,000 for first-time homebuyers.


President Donald Trump has released an outline of his overarching goals for his second term, but fewer details regarding the effects on millionaires’ taxes are available.  Trump proposes an unspecified tax cut to boost take-home pay and an unspecified “Made in America” tax credit.  Additionally, he proposes to expand Opportunity Zones, a TCJA program providing capital gains tax relief for individuals investing in qualified Census tracts.

Trump has also mentioned reducing the capital gains tax rate from 20% to 15% and indexing capital gains to inflation.  Trump has additionally called for “middle-class tax cuts” in the form of rate reductions, though the benefit of rate reductions would primarily accrue to top earners.  President Trump has also shown support for the extension of the TCJA’s individual income marginal tax rate reductions and the standard deduction increases, which will end in 2026.

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