This story by Kevin Hardy appeared on Stateline,org on April 29, 2026.
While the idea of a special tax on millionaires is hotly debated across the country, Maine state Rep. Cheryl Golek characterized her state’s new tax as a modest and reasonable step toward fairness.
That’s because, she said, working- and middle-class households in Maine — including teachers, firefighters and nurses — are paying effective state income tax rates similar to or higher than those of the highest earners.
“Those who benefit the most from our economy do so because of the people, infrastructure and communities that support that success,” said Golek, a Democrat. “Asking for a small additional contribution from the wealthiest in our state is a reasonable and widely supported step toward a fairer system.”
The legislation signed by Democratic Governor Janet Mills this month will add a 2% tax to households whose income exceeds $1 million per year.
Maine and Washington, which enacted its own law last month, are among the latest Democratic-led states to ask for more tax dollars from the rich as national wealth inequality widens and states face heightened budget pressures. They follow the lead of other states including New Jersey and Massachusetts that have implemented specific taxes for the rich.
The idea is gaining traction as lawmakers in at least a dozen states, including Illinois, Minnesota, Rhode Island and Virginia, have proposed new taxes for the wealthiest taxpayers. In California, advocates this week announced they gathered enough signatures for a ballot initiative that would impose a one-time tax on billionaires. But these proposals often stir years-long battles.
The taxes can take different forms — taxing annual incomes above a certain threshold or taxing capital assets, including high-value stocks and real estate. Earlier this month, New York Mayor Zohran Mamdani and Governor Kathy Hochul, both Democrats, proposed a new pied-à-terre tax for homes valued above $5 million when owners have a separate primary residence outside of New York City.
In neighboring New Jersey, those earning over $1 million per year face an income tax top rate of 10.75% in addition to a so-called mansion tax on the sales of high-value homes.
Proponents say these moves can help balance state tax structures that are tilted against lower earners. The left-leaning Institute on Taxation and Economic Policy says the tax systems of 40 states favor the wealthiest earners. But opponents argue that these measures levy new taxes on business owners, dissuading local investment and encouraging rich residents to move away — especially risky during a time when many other states are slashing taxes.
“When the outlook of our population growth is stagnant and we should be attracting people to Maine, it puts a disincentive to people to call Maine home,” Patrick Woodcock, president and CEO of the Maine State Chamber of Commerce, said during a news conference ahead of the state House vote on the tax.
The rising push to tax the wealthy in liberal states comes as some red states are moving to more regressive tax systems, which put a higher burden on lower earners.
“You increasingly have two poles where you have a larger number of states with fairly low income taxes and a smaller but still significant number of states that have doubled down on high rates, particularly high rates on high earners,” said Jared Walczak, senior fellow at the conservative-leaning Tax Foundation.
He said increasing income taxes pushes wealthy people and employers to low-tax states. Even if individuals don’t directly move because of taxes, they follow businesses to other states, he said.
And some progressives are wary of going too far: California Democratic Gov. Gavin Newsom is opposing the ballot initiative that would impose a one-time 5% tax on those whose net worth exceeds $1 billion. Hochul, who pushed for the new tax on second homes in New York City, has warned that more tax increases on the millionaires and billionaires could hollow out a crucial portion of the state’s tax base.
Walczak said only a handful of in-demand places can afford to impose higher taxes for the same reason that people pay higher rents.
“It’s worth it to a lot of people,” he said. “People are willing to pay very high rent, but there’s a limit. In the same way, they’re willing to pay higher taxes to live in New York, but there is a limit.”
Rising wealth inequality
The gap between the rich and poor has been widening for decades.
Wealth for the bottom fifth of American households has barely moved in recent decades, while the top 0.1% have seen their wealth increase by nearly $40 million each, according to an analysis by the anti-poverty nonprofit Oxfam America.
Between 1980 and 2022, the share of national income going to the top 1% doubled, while the share going to the bottom 50% fell by a third, Oxfam reported.
Recent federal policy changes have only exacerbated the need for progressive state tax changes, said Amber Wallin, executive director of the State Revenue Alliance, which is lobbying for higher taxes for the wealthy across multiple states.
President Donald Trump’s major tax and spending bill, often called the One Big Beautiful Bill Act, slashed funds for safety net programs including food stamps and Medicaid. At the same time, it provided tax cuts that largely benefit the wealthy.
“So we know millions will lose access to healthcare, millions will lose food assistance, and states all across the country will see funding cuts for key programs,” she said. “We know that people power a strong economy, not tax cuts for the wealthy, and when the rich pay their fair share of taxes, we all benefit.”
Since Massachusetts voters in 2022 approved a 4% surtax on annual incomes above $1 million, that Fair Share Amendment has provided the commonwealth with $6 billion in transportation and education funding.
But Jim Stergios, executive director at the libertarian-leaning Pioneer Institute, said it’s not just the ultra-wealthy who are paying that tax. People who record a one-time sale of a business or a home can face the tax even if they’re not earning over $1 million every year, he said.
He said the tax is pushing residents out of the state and dampening business investment. Federal data from the U.S. Census Bureau shows Massachusetts lost more than 33,000 residents to other states last year, though Democratic Gov. Maura Healy noted the overall population did increase because of foreign immigration. Stergios noted lawmakers are still facing challenges balancing the state budget even with the new revenue.
“So over the long term, it’s not going to have a salutary effect,” he said. “We’re going to continue to have budget problems. We do have budget problems even with this.”
Proponents and opponents of the state’s millionaire’s tax have touted recent IRS data in their arguments: Residents leaving Massachusetts took a total of $4.2 billion in adjusted gross income with them in 2023, the first year of the new tax, Bloomberg reported. Yet the number of residents moving out of Massachusetts who reported income of $200,000 or more fell after the tax was implemented.
“There’s no real evidence of millionaire out-migration. I’m sure there’s some isolated anecdotes, but the actual data don’t show it,” said Phineas Baxandall, director of research and policy analysis at the left-leaning Massachusetts Budget and Policy Center.
He said one piece of evidence that the wealthy remain in Massachusetts are the proceeds of the tax itself, which are funding major priorities including free community college and expanding childcare subsidies for thousands.
“Massachusetts is rightfully fearful of the federal cuts that are happening,” Baxandall said, “but we’ve been able to still move forward with real, transformational investments.”
Already, some conservative states, including Idaho, Indiana and Florida, have made moves to reject some of last year’s federal tax changes that benefit corporations and the wealthy.
Stateline reporter Kevin Hardy can be reached at khardy@stateline.org.
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