Photo by Dwight Burdette | CC BY-SA 3.0

Massachusetts ranked 34th in the Tax Foundation’s annual business tax climate index released last month, but analysts at the think tank say the state’s ranking would slide all the way down to 46th if the income surtax on Tuesday’s ballot were in effect right now.

Jared Walczak, vice president of state projects at the right-leaning Tax Foundation and the lead researcher on the index, confirmed that projection  last week. In the latest index, released on Oct. 25, Massachusetts ranked 50th on its unemployment insurance taxes and 46th on its property taxes. The Bay State scored 36th on its corporate tax, and its overall ranking was pulled up by a sales tax ranking of 13th and an income tax ranking of 11th.

“Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its region, and even globally,” the foundation said in its annual report. “Ultimately, it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.”

Supporters of the constitutional amendment allowing a 4 percent surtax on household income above $1 million say it will raise funds needed to improve transportation and education, but critics of the idea, like the Tax Foundation, claim it will steer capital outside the state.

In a September report, the foundation predicted that the tax, if adopted, would lead to an outflow of adjusted gross income (AGI) to other states, naming Florida and New Hampshire, two states with no individual income tax, as “top destinations for net outmigration of AGI from Massachusetts.”

Massachusetts’ ranking of 34th in the 2023 index was up one notch from the 2022 index. Massachusetts posted its highest recent ranking in 2018, when it placed 25th.