‘Millionaire tax’ will tie their hands on policy, group warns lawmakers

Printed from: http://newbostonpost.com/2016/02/03/millionaire-tax-will-tie-their-hands-on-policy-group-warns-lawmakers/

STATE HOUSE — Ahead of a potential vote on the proposal, the Massachusetts High Technology Council warned Wednesday that a proposed 4 percent surtax on incomes over $1 million would “severely limit legislative and citizen power to set and amend tax policy in response to economic conditions.”

The House and Senate meet together at 1 p.m. for a Constitutional Convention where a citizens’ initiative (H 3933) is on the agenda behind nine other proposed legislative amendments to the state’s constitution.

The citizens’ amendment, which would need the votes of 50 lawmakers this session and next before appearing on the 2018 ballot, would add a 4 percent surtax on incomes over $1 million on top of what is now a 5.1 percent flat income tax.

Critics say the move will lead to a graduated income tax structure in which higher earners are taxed at higher rates and lower earners at lower rates. Unlike prior, unsuccessful attempts to allow for tiers in the state income tax, this latest effort would not remove the requirement for a flat income tax rate.

Proponents of the amendment, who last year gathered 92,617 certified signatures around the state to advance the proposal, argue it will have twin goals of establishing a more fair tax system and providing needed dollars for education and transportation.

The Department of Revenue estimates the surtax would generate $1.9 billion in revenue, and while the amendment states all the dollars raised would be limited to transportation and education investments, opponents counter that the constitution prohibits ballot referendums from making specific appropriations.

According to the High Tech Council, establishment of the higher tax bracket would place Massachusetts below only California and Minnesota as one of the highest top-tax-rates among “peer technology” states.

The council warned that General Electric – whose move from Connecticut to Boston was touted by the mayor, the governor and the House speaker in their annual speeches last month – was related to “anti-competitive state tax policies” in Connecticut.

In a letter to lawmakers on Tuesday, Council Executive Vice President Mark Gallagher said polling shows support for the measure falls to 24 percent if voters believe funds raised from the higher tax rate will go into the state’s General Fund.

“These voters know that the biggest impediment to fiscal health and stability of the Commonwealth is not a lack of revenue, but an insatiable demand for spending,” Gallagher said in a statement.

The council contends that if lawmakers advance the amendment and it is approved by voters, the Legislature’s hands will be tied because income tax thresholds will be enshrined in the constitution.

“The proposed amendment would actually embody the tax in the language of the constitution itself and even go so far as to specify the tax rate and income threshold in the text of the constitution,” Gallagher wrote. “Due to the elaborate and lengthy process required to amend the constitution, both voters and future legislatures would be severely constrained in their ability to modify the tax should adjustments be warranted or necessary in response to changing circumstances in the future. Through periods of recession and expansion, boom and bust, inflation or deflation, you and your successors in the General Court would be virtually powerless to modify this key state tax policy in a timely manner.”

The council is made up of technology companies, higher education institutions, law firms and other business ventures. Board members include representatives from workforce management company Kronos Inc., the lobbying firm ML Strategies and Northeastern University. Other members listed on the council’s website include the University of Massachusetts system and government agencies with strong economic ties like the Massachusetts Port Authority and MassDevelopment.

Gov. Charlie Baker, who generally opposes tax hikes but has yet to align himself for or against the proposed amendment, was the council’s communications director in the early 1980s. Harvard Pilgrim Health Care, the insurance company that Baker once ran, is also a member of the High Tech Council.

— Written by Andy Metzger

Copyright State House News Service