States Move to Tax the Top in 2024

This year a handful of states are leaning into bold tax legislation that asks more of high-income people and wealthy shareholders. Policy action across the country—as highlighted here in New Mexico, Hawaii, Maryland, Massachusetts, New Jersey, New York, and Vermont—would ask more of the wealthy and, in many cases, help states invest in public goods and sustainably fund shared needs such as affordable housing, transit, infrastructure, and health care. 

New Mexico

The Land of Enchantment used this year’s legislative session to add progressivity to their tax system. These steps have built upon exciting momentum in the state over the past several years. Since 2018, New Mexico has made its tax system more progressive, moving 18 spots in ITEP’s Tax Inequality Index, the biggest positive move of all the states. This is largely due to policy changes including the creation of a Child Tax Credit, expansion of the state’s Working Families Tax Credit, and an increase to the top marginal income tax rate.  

Lawmakers didn’t stop there. This year they approved, and Gov. Michelle Lujan Grisham signed into law, an omnibus tax bill that will, among other things, improve New Mexico’s corporate income tax and further limit the state’s capital gains deduction for high-income earners. These steps will help ensure that the wealthiest pay closer to their fair share on investment income that already enjoys preferential tax treatment at the federal level. 

New Mexico stands out as the first state during this set of legislative sessions to move tax increases on the wealthy over the finish line. 

Hawai’i

Gov. Josh Green has a bill being debated in the State House that would increase the conveyance tax on homes sold for more than $6 million and homes sold for less if the new owner doesn’t qualify for the homeowner’s exemption on property taxes. A portion of the revenue would go toward transportation-related projects in the state. These proposals would help rebalance the state’s upside-down tax code and advance racial and economic equity.  

Maryland

Faced with a projected $1.1 billion revenue shortfall, lawmakers have proposed a tax package that would raise $1.6 billion a year to close that gap and provide tax credits for low-income households.  

The policies, together known as the Fair Share Plan, would: reverse changes to the estate tax that allowed many multi-millionaire decedents from paying the tax; enact a 7 percent tax increase for people with income over $1 million; and create a 1 percent surcharge on capital gains. It would also close loopholes that wealthy corporations use to hide profits overseas in low tax countries, by passing a policy called worldwide combined reporting. With the additional revenue, the proposal would also expand existing refundable credits for families and children.  

Lawmakers have also introduced a separate revenue raising package that would levy new tolls and fees, tax online gambling, and—like the Fair Share Plan—ask more of profitable corporations through worldwide combined reporting.  

Massachusetts

Gov. Maura Healey’s housing bond bill includes a proposal to allow municipalities to adopt a real estate transaction fee of 0.5 percent to 2 percent on the portion of property sales over $1 million. The revenue raised by localities would go to support affordable housing programs. A recent ITEP study finds that 17 cities and counties currently levy these progressive “mansion taxes.” Momentum for these policies has grown in recent years as they’ve been enacted to fund critical priorities including housing, education, and infrastructure. 

New Jersey

Gov. Philip Murphy called for a 2.5 percent corporate transit fee in his recent budget proposal. The tax, if enacted, would apply to companies with more than $10 million in profits. This would raise an estimated $818 million a year, which would be dedicated to fund NJ Transit, an agency that faces a nearly billion-dollar shortfall. This proposal follows the expiration of a similar corporate business surcharge that expired at the end of 2023.  

New York

Budget bills from both the House and Senate include temporary income tax increases for the state’s wealthiest households and corporate shareholders. The personal income tax would be increased by half a percentage point for people earning more than $5 million and the corporate income tax rate would be raised from 7.25 percent to 9 percent through 2026. If enacted, this would raise an estimated $2.2 billion a year to support affordable housing and other public services.   

Vermont

In Vermont, lawmakers have introduced two bills that would increase taxes on the wealthiest households. One would create a surcharge on unrealized capital gains for households with a net worth of more than $10 million. The other bill would create a 3 percent tax on households earning more than $500,000, which is estimated to raise about $100 million. The legislation follows calls from a state coalition to raise progressive revenue to fund affordable housing, health care access, infrastructure repairs, and climate change mitigation. Lawmakers are also considering implementing worldwide combined reporting. 

These forward-thinking states are demonstrating the wide variety of options for policymakers who want to raise more from the wealthiest people, rein in corporate tax avoidance, create fair tax codes and build strong communities.  

---

---