History suggests these revenue gains will be fleeting. And Massachusetts’ experience with the surtax has been a painful lesson in unintended consequences.

Coming out of the COVID-19 pandemic, Massachusetts’ economy was outperforming those of most other states, aided by a combination of moderate governance and a lighter regulatory touch. In this growth environment, labor unions pitched the ballot measure as a narrowly targeted “millionaires tax” that would hit only the richest of the rich.

In practice, the tax affects a much broader swath of the state’s electorate, including small business owners whose business income is reported on their personal tax returns.

Despite strong GDP growth, Massachusetts was already struggling to keep residents from fleeing to lower-tax states such as Florida and New Hampshire. Between 2021 and 2022, the Commonwealth experienced a net outmigration of 45,614 tax filers, according to Internal Revenue Service data. That accounted for a $3.9 billion net decrease in state tax filers’ income, a Pioneer Institute analysis found.

The new surtax created a top tax rate of 9 percent — nearly double the already high previous figure — on that portion of people’s income above the $1 million threshold. While IRS data is not yet available for 2023, several other data sources indicate the state’s outmigration crisis has worsened considerably since the surtax took effect.

A survey published in March 2023 by the state’s trade association for certified public accountants found that 82 percent had higher-income clients who planned to leave Massachusetts within the next 12 months. United Van Lines reported that Massachusetts had the fifth-highest percentage of outbound moves in the country in 2024. UHaul’s index, based on similar moving data, recently ranked us 49th out of 50 states for population growth.

These aren’t residents the state can afford to lose: 44 percent of the net decrease in tax filers’ income comes from individuals in the critical 26-to-44 age bracket. These are people, many of them likely with families or thinking of starting a family, who are no longer choosing to put down roots in Massachusetts.

Advocates for the surtax boast about the short-term increase in tax revenue, which was up by about 4.2 percent in 2024 from the previous fiscal year. But the long-term economic outlook is bleak: Projections from Boston University suggest Massachusetts could lose nearly $1 billion in annual revenue by 2030 due to the exodus of higher-income professionals. This is consistent with other states’ experiences: A 2024 study in the American Economic Journal, examining more than a century of state income tax introductions, found that after World War II, outmigration to non-income tax states generally offset any income-tax revenue boost.

Surtax proponents have dismissed concerns of a causal link between higher taxes and outmigration. But in a new Mass Opportunity Alliance survey of 500 residents who left after November 2022 (moving to the no-income tax states of New Hampshire or Florida), 67 percent identified the state’s high cost of living as a determining factor. Asked to name a specific policy that influenced their decision, an overwhelming 71 percent said taxes.

Now the old “Taxachusetts” label has come back to haunt us. Our ranking in the Tax Foundation’s State Business Tax Climate Index fell from 34th to 46th the year after the ballot measure was passed, and in 2024 we dropped from 15th to 38th in CNBC’s rankings of top states for business. In a recent speech, New Hampshire’s new governor, Kelly Ayotte, called Massachusetts “a cautionary tale” and encouraged businesses to relocate to her lower-cost state.

Massachusetts has a spending problem, not a revenue problem. Despite last year’s revenue boost from the surtax, the state still faced a nine-figure budget shortfall, wiping out multibillion-dollar budget surpluses from earlier this decade. Massachusetts cannot tax-and-spend its way back to a competitive economy.

In Rhode Island, the new tax legislation has been referred to finance committees. Meanwhile, this isn’t the end of the story for Massachusetts: Our organizations, and others like us, are committed to advancing policies that restore our competitiveness and make our state a place where individuals, families, and businesses can thrive. But Massachusetts’ experience should serve as a wake-up call for policy makers in Rhode Island and other states considering similar measures.

The consequences of high taxes on income are real and far-reaching — driving away talent, reducing economic dynamism, and hurting the citizens such policies aim to help.