Millionaire’s Tax Proposal Moving Ahead in Massachusetts

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By Aaron Nicodemus

High-earning taxpayers could pay more in 2019 if a grassroots advocacy group’s proposal makes it past the state Legislature and voters.

Raise Up Massachusetts—a coalition of faith, community and labor groups—is poised to place a proposed millionaire’s tax on the state ballot next year by an unusual method: an amendment to the state’s Constitution. The group has already passed several significant hurdles in its effort to impose an additional 4 percent tax on individual or married couples’ income that is more than $1 million.

The amendment passed by a 135-57 vote last year in a joint session of the House and Senate, called a Constitutional Convention. It must receive at least 50 votes in the next Constitutional Convention, scheduled for June 14, in order to be placed on the ballot.

The amendment would designate the money to be used on public education and transportation projects. The proposal could raise between $1.6 billion and $2.2 billion annually, according to the Massachusetts Department of Revenue.

“Transportation and education really need transformative investments,” Andrew Farnitano, spokesman for Raise Up Massachusetts, told Bloomberg BNA May 15. “The wealthiest people in the state have benefited from our state’s infrastructure and education systems. Now they should give back.”

“We need more revenue,” Sen. Patricia D. Jehlen (D), assistant vice chair of the Senate Committee on Ways and Means, said during a news conference May 16. “We are hoping that something will happen in 2018, that people will pass a tax increase on millionaires, that will allow us to increase funding for education and transportation.”

Other states, including California, New York and Maine, have passed surcharges on high income earners. California has a 13.3 percent tax on individual taxpayer incomes over $500,000 and married couples earning more than $1 million, New York collects 8.82 percent tax on individual incomes over $1 million and couples earning more than $2.1 million and Maine imposes an additional 3 percent surcharge on Maine taxable income in excess of $200,000.

‘Myth’ of Moving Millionaires

The Massachusetts Taxpayers Foundation has been fighting the amendment, arguing the additional tax could hurt the economy by “driving the risk-takers, investors and entrepreneurs out of state,” said the foundation’s president, Eileen McAnneny.

“It could hurt the state long-term, as well, when college students inventing the ‘next big thing’ choose to start elsewhere,” she told Bloomberg BNA.

An April 27 report released by the Massachusetts Budget and Policy Center, a nonprofit think tank, debunked claims of millionaires moving because of tax surcharges.

“Extensive empirical evidence and numerous sophisticated statistical studies clearly show that only a small share of high-income households move in response to higher tax rates. As a result, ‘millionaires taxes’ predictably deliver the overwhelming majority—some 99 percent—of their expected net, new revenue,” the report said.

However, the foundation argues that tax increases shouldn’t be part of the state’s constitution.

“If there are tweaks to be made, or problems, in order to amend it you have to go through a four-year process,” McAnneny said. “It is not the way to make tax law.”

War of Words

Gov. Charlie Baker (R), who has campaigned on a platform of no new taxes, is being tested on this issue.

One possible Democratic opponent, Jay Gonzalez, the former state budget chief under Gov. Deval Patrick (D), has been canvassing the state, making the case for the income surcharge on millionaires. On May 15, he attempted to goad Baker into taking a stand on the issue.

“Once again, Governor Baker has sat on the sidelines and taken no position on this issue. The people deserve to know where he stands: does he support asking those at the top who are doing great through this economic recovery to pay more in taxes to support improvements to our education and transportation systems that will benefit everyone, or not?” Gonzalez said in a statement.

While the issue is likely to become hotly debated during the next campaign for governor, Baker declined to get drawn into a war of words.

“At this point in time, it’s not before the Legislature or the administration, but as I’ve said before, we shouldn’t be raising taxes on hardworking people in Massachusetts. We should be focusing on finding ways to do our jobs more effectively and efficiently,” Baker told reporters.

To contact the reporter on this story: Aaron Nicodemus in Boston at anicodemus@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of the amendment is at http://src.bna.com/oTm.

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