Massachusetts High Court Strikes Down Millionaire’s Tax (1)

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Aaron Nicodemus

The Massachusetts Supreme Judicial Court ruled that the millionaire’s tax amendment can’t be included on the state’s November ballot, a decision that could have a ripple effect on several other potential ballot questions.

In a split decision June 18, five SJC justices agreed with representatives of five business groups that the proposed constitutional amendment adding a 4 percent surcharge on the state’s personal income tax rate for incomes over $1 million shouldn’t be allowed on the ballot. The amendment had been pushed by Raise Up Massachusetts, a coalition of labor, faith, and community groups, and would have raised an estimated $2 billion in annual tax revenue.

“We conclude that the initiative petition should not have been certified by the Attorney General as ‘in proper form for submission to the people,’ because, contrary to the certification, the petition does not contain only subjects ‘which are related or which are mutually dependent,’” Justice Frank M. Gaziano wrote in the majority opinion.

‘Logrolling’ Argument

Representatives for the business groups—Associated Industries of Massachusetts, the Massachusetts High Technology Council, the Massachusetts Taxpayers Foundation, the National Federation of Independent Businesses, and the Massachusetts Competitive Partnership—had argued that the amendment paired an unpopular provision (the graduated income tax) with two popular ones (funding for education and transportation), a practice known as logrolling.

The SJC agreed, ruling that the amendment contained three separate initiatives: the graduated income tax, funding for education, and funding for transportation. The amendment therefore failed the “relatedness” and “mutually dependent” requirements for ballot questions contained in Article 48 of the state’s constitution.

“We are unable to discern a common purpose or unified public policy that the voters fairly could vote up or down as a whole. The two subjects of the earmarked funding themselves are not related beyond the broadest conceptual level of public good,” the opinion said. “In addition, they are entirely separate from the subject of a stepped rather than a flat-rate income tax, which, by itself, has been the subject of five prior initiative petitions.”

A dissenting opinion written by Justice Kimberly S. Budd, joined by Chief Justice Ralph D. Gants, said that taxing and funding initiatives are always mutually dependent, and therefore there is no concern about confusing voters.

The amendment had been certified for the ballot by Attorney General Maura Healey, after being approved by two separate votes of the state legislature. Healey said she was “disappointed” by the SJC’s decision.

“As a policy matter, I believe it is reasonable to ask those at the very top to pay their fair share,” Healey told Bloomberg Tax in an emailed statement. “I look forward to working toward that goal with the Legislature, advocates, and the many business leaders who supported this proposal.”

‘Some Limits’

Lawrence Friedman, a law professor at New England Law|Boston, said the majority of the justices were correct in interpreting the state constitution’s limits on what can be related.

“I suppose in theory that anything can be related,” he told Bloomberg Tax. “But the constitution does impose some limits on what can be related, and the court found that those limits have to mean something.”

The majority opinion explained that point, saying that perhaps there’s a voter who would want a graduated income tax without earmarking funds, or another voter who wanted to earmark funds without establishing the tax. Both voters would be left “in the untenable position of choosing which issue to support and which must be disregarded.”

The concurring opinion from Justice Barbara Lenk provided a potential road map for proponents to reintroduce the measure in the future, according to David Nagle, a tax attorney at Sullivan and Worcester LLP in Boston.

“If you want to try this again, the safer course might be to go with a tried-and-true revenue raiser” of a ballot question that imposes a tax on millionaires without any earmarks, Nagle said.

Ripple Effect

Rick Lord, president and CEO of Associated Industries of Massachusetts, said he was pleased with the decision.

“We are gratified that the Supreme Judicial Court agreed with the business community that the proposed question improperly combined a graduated income tax that has been rejected multiple times with spending requirements meant to appeal to voters,” he said in a June 18 blog post.

Raise Up Massachusetts, which had spent two years collecting signatures and pushing the legislature to approve the amendment, was “incredibly disappointed” by the decision.

“We are incredibly disappointed that a few wealthy corporate executives and their lobbyists brought this lawsuit that blocked the right of Massachusetts voters to amend our state’s constitution,” the group told Bloomberg Tax in an emailed statement. “It is stunning that these business groups would overturn the will of the more than 157,000 voters who signed petitions to qualify the Fair Share Amendment for the ballot, and of two overwhelming majorities in consecutive Constitutional Conventions.”

The decision will likely have a ripple effect on several other ballot initiatives that propose to cut the state’s sales tax to 5 percent from 6.25 percent, to implement a paid family and medical leave program, and to raise the state’s minimum wage to $15. Proponents and opponents of all three have been waiting for a decision on the millionaire’s tax amendment before finalizing compromise legislation that would make the ballot questions unnecessary.

The case is Anderson v. Healey , Mass., SJC-12422, 6/18/18 .

To contact the reporter on this story: Aaron Nicodemus in Boston at

To contact the editor responsible for this story: Ryan C. Tuck at

Copyright © 2018 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State