Three years ago, Massachusetts voters looked poised to pass the so-called “millionaire’s tax,” a ballot initiative to place an additional 4 percent tax on annual income over $1 million and use the revenue — up to $2 billion a year — to fund public education and transportation improvements.
Supporters blew past the number of signatures needed to qualify for the 2018 ballot. Poll after poll after poll showed the proposed state constitutional amendment with an overwhelming 4-to-1 margin of support.
But before Massachusetts voters had a chance to officially weigh in, the ballot question was struck down by the state’s Supreme Judicial Court, which ruled that the “Fair Share Amendment” unconstitutionally combined two independent subjects — spending on education and on transportation.
“That didn’t quite work the way we hoped it would,” state Rep. Jim O’Day, a Worcester Democrat and supporter of the ballot question, said during a campaign relaunch Wednesday.
“We’re on the right path now,” O’Day said.
With eyes on 2022, supporters are taking a similar, if slightly different, approach to putting the millionaire’s tax on the ballot, sidestepping the legal pitfalls that doomed the question in 2018.
“I don’t think they have a barrier from that perspective,” acknowledged Chris Anderson, the president of the Massachusetts High Technology Council, which was part of the group that filed the lawsuit that ultimately sunk the proposal three years ago.
“That procedural obstacle doesn’t exist with this version”
In its second-coming, the ballot question itself hasn’t changed.
Almost exactly like in 2018, the Fair Share Amendment would increase the state’s income tax to 9 percent for annual income above $1 million beginning in January 2023. Even for those who earn more than $1 million, their first $999,999.99 in earnings would remain taxed at 5 percent at the state level. And the $1 million threshold would be raised each year to reflect cost-of-living increases.
The key change is the procedural process.
In 2018, Raise Up Massachusetts looked to pass the amendment through the citizens’ ballot initiative process, which requires supporters to collect a certain number of signatures.
(Some background: The reason the amendment process is necessary is because the Massachusetts constitution somewhat unusually requires the state’s income tax to be flat — or, in other words, the same percentage rate for everyone. Eight other states also have flat income taxes; 32 have progressive graduated state income tax codes, in which the rate increases for higher earners.)
The citizens initiative process also requires ballot questions to only include subjects that are “related” or “mutually dependent.” It was that relatedness requirement that ultimately left the 2018 ballot measure vulnerable to the lawsuit by business groups, to the chagrin of many local Democrats.
So this time they’re trying a different route: the legislative amendment process.
The process — which was the original way Massachusetts amended its constitution — requires approval from a majority of state lawmakers in the House and Senate during two consecutive joint legislative sessions before going to the November ballot.
While that’s a more difficult hurdle than the 25 percent approval threshold needed in the Legislature for citizens’ amendments, the legislative amendment crucially does not include any requirement that the subjects within the ballot question be related.
“There’s no restriction on how many subjects that it can have to do with, so that procedural obstacle doesn’t exist with this version of the amendment,” says Andrew Farnitano, a spokesman for Raise Up Massachusetts, the coalition backing the millionaire’s tax.
One more vote
The revived ballot question took its first step forward in 2019, when the Legislature approved it on a 147-48 vote. In order to reach the 2022 ballot, it needs approval just one more time from the Legislature during the current two-year session.
Supporters say they’re confident that won’t be a problem.
“All the conversations that I’ve been having very recently with my Senate colleagues, including the Senate President [Karen Spilka], is that the support and enthusiasm for the Fair Share Amendment is as strong as ever,” state Sen, Jason Lewis, a Winchester Democrat, said Wednesday.
O’Day says, ideally, the Legislature will vote on it this summer and that “additional pressure would need to be brought to bear” if that didn’t happen by November.
House Speaker Ron Mariano, who was one of the few Democrats that voted against the millionaire’s tax in 2016 and 2017, voted for it in 2019 and said in December that he would now support the amendment. However, the Quincy lawmaker subsequently expressed frustration with the amendment process during a business forum in March.
“We have this or nothing, and it’s a difficult choice for legislators,” said Mariano, whose office did not respond to a request for comment Wednesday.
“It’s a process that’s used by people who are frustrated because their positions may be too extreme to get enough support to get a bill through the House, so they resort to, I call it an end run around the Legislature,” he added.
Would wealthy families flee — or is it fear-mongering?
The state’s Department of Revenue estimated that the additional surtax would have raised $1.6 to $2.2 billion in revenue in 2019 for improving public education, making public colleges more affordable, and maintaining roads, bridges, and public transportation. Supporters say it might even be higher, given the pandemic-era boom in wealth for the already rich.
“There are a lot more annual incomes over a million dollars,” Phineas Baxandall, an analyst for the center-left Massachusetts Budget and Policy Center, said Wednesday. “So by all estimates, the amount of revenue that would be coming in would be larger than that $1.9 [billion] midpoint estimate.”
Business groups, however, are pressing legislative leaders to delay the vote and reject the amendment, citing concerns about the post-pandemic landscape and businesses fleeing to other low-tax states — potentially undercutting the expected revenue from the tax. The libertarian-leaning Pioneer Institute has also released multiple studies warning that everything from the local startup scene to retirement plans could be impacted.
“It’ll be the best economic development policy the state of New Hampshire has ever got,” Anderson said, adding that high earners also tend to be more mobile.
Anderson also questioned the need for the tax, noting that the state has received roughly $70 billion in federal COVID-19 relief funds and that state tax revenues have surprisingly beaten projections during the pandemic. Additionally, he noted that Massachusetts would likely see increased federal taxes for high earners and increased funding for education and transportation, if Congress passes President Joe Biden’s recently proposed infrastructure and family plans.
“There are just so many unknowns right now about impacts from Washington and the behavior of taxpayers post-pandemic,” Anderson said.
Supporters dismiss those concerns as “fear-mongering,” arguing the pandemic has only further exacerbated and exposed increasing inequalities that the tax was originally proposed to address. Advocates pointed to underfunded schools and transit systems in the state’s working class gateway cities. And even with federal relief funds, the MBTA is facing long-term budget challenges due to the pandemic-induced decline in fare revenue.
“As we recover from the pandemic, those investments are needed more than ever, and the Fair Share Amendment is the best way to pay for them,” O’Day said.
While the amendment would give Massachusetts the highest top marginal tax rate in New England (though just barely; Vermont taxes annual income above $200,000 at 8.75 percent), Lewis noted that it would put the state in line with “peer states” like California, New York, New Jersey, Minnesota, and Oregon. The majority of states, as well as Washington, D.C., currently have top tax rates above 5 percent.
“Massachusetts is never going to win a competition with other states by having the lowest taxes,” Farnitano said, adding the state’s historic strength is its “highly educated workforce” and employers are more concerned about having access to quality schools and a good commute to attract top talent.
Lewis said the criticism “shows a very superficial understanding of how people decide where to live, where to work, raise a family, run a business, and retire.”
“Taxes are only a very small factor,” he said, pointing to other factors like the cost of housing, health care, transportation, and child care.
“Wealthy families that have benefited the most from the economic growth of the past four decades — and over the past year during the pandemic — can certainly afford to pay slightly higher income taxes to fund these critical investments,” Lewis added.
Still, Anderson noted that it would be difficult to re-amend the constitution if the ballot question passes. With “shifting” government priorities and employers still experimenting with post-pandemic work environments, he said the Fair Share Amendment presents a risky proposition.
“Once they take this vote, they cannot take it off the November 2022 ballot,” Anderson said.
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