‘Millionaire’s tax’ vote Wednesday expected to push it forward
By Evan Lips | May 17, 2016, 18:17 EST
BOSTON – Republicans in the state Senate appeared resigned on Tuesday to the idea that Wednesday’s vote over a constitutional amendment that would slap the commonwealth’s top earners with a special tax surcharge will be a mere formality rather than a considered move informed by an actual debate.
“The way this building is and as liberal as this building, is I would say there’s probably not a chance it will not be going forward,” said state Sen. Richard Ross, a Republican from Wrentham whose party is badly outnumbered in the State House. “I know many of us who earn our money the old-fashioned way, if we were to hit a million dollars, I wouldn’t want to have a special tax created just for me because I worked hard.”
The so-called “millionaire’s tax” is a proposed constitutional amendment which to advance needs support from just 50 out of the combined 200 members of the Senate and House of Representatives. Just 40 out of that 200 are Republicans.
The measure calls for imposing a 4 percent surtax on all earned income exceeding $1 million. If approved during Wednesday’s constitutional convention, the proposal would need another 50 votes at a second constitutional convention during the 2017-2018 legislative session.
But it would still face more hurdles, including winning a majority of Massachusetts voters to support a November 2018 ballot initiative. The proposal stipulates that the revenue generated by the surtax would be used either for transportation or education-related initiatives. But critics say state law bars earmarking income tax revenue for specific purposes and that it would flow into the general fund, available for all normal budget expenses.
Massachusetts is currently one of just eight states that imposes a single income tax rate, known as a flat tax, set at 5.15 percent for this year. If the amendment passes into law, the surtax would hit starting in 2019.
Sen. Donald Humason, a Westfield Republican, asked if there was any chance the measure would fail to move a step closer to the 2018 ballot during Wednesday’s convention, was also blunt.
“I don’t think so,” he said. “I think the Speaker has identified enough votes just within the House alone and I know there are a number of my colleagues in the Senate that are sort of chomping at the bit,” Humason said, referring to House Speaker Rep. Robert DeLeo, a Winthrop Democrat.
“I don’t expect to find any members of the minority party voting for it tomorrow and I hope we find other people that will join us, but in this building it isn’t a very tough threshold to get to 50,” he said about initiatives backed by Democratic leaders.
Ross and Humason were also candid about their reasons for opposing the proposal. Humason said it could have a “chilling effect” on attracting entrepreneurs and business owners to live or stay in Massachusetts.
“You can only tax the producers for so long before those producers take their energy and their drive and go to another state,” Humason said. “New Hampshire is just a few miles away, and it offers so many benefits that are already being used by taxpayers and residents in Massachusetts as well as business people.”
Wrentham’s Ross questioned the reasoning behind enacting such a policy.
“You have to wonder what the motivation is, other than obviously to fund programs that we perhaps don’t have enough money for right now,” he said.
Supporters have pointed to a study released by the Revenue Department claiming that the proposal could inject more than $2 billion annually into state coffers. Noah Berger, president of the left-leaning Massachusetts Budget and Policy Center, said Tuesday that the long-term effects would be positive for the state.
“I think when most people look at the effects on the economy long-term, what our economy needs is a better-educated workforce and a transportation system that works,” he said, a not-so-subtle reference to the Massachusetts Bay Transportation Authority, an agency that is currently $5.5 billion in debt and running annual budget deficits.
Humason countered that the extra revenue won’t matter if the state can’t live within its means.
“I think in a $40 billion budget we should be able to prioritize those things that are important, like economic development and like education,” he said. “If we can’t fund that with $40 billion, I’m not sure that $42 billion or $43 billion will help.”
“At some point you are trying to get blood from a stone, and I’ll use another cliche: You don’t want to kill the goose that lays the golden egg and that’s what this thing we’re taking up at our constitutional convention would do,” Humason said
Fiscal watchdog groups like Citizens for Limited Taxation and the Massachusetts Fiscal Alliance have also expressed similar concerns. The fiscal alliance has even identified 12 lawmakers they dubbed “The Dirty Dozen” over their support for the proposal.
“The dirty dozen will call it a millionaire’s tax, we’ll call it what it is: an 80 percent tax hike on the state’s economic leaders,” the alliance said in a recent public statement. “The dirty dozen love to quietly pervert the tax code, and we won’t let that happen.”
Citizens for Limited Taxation has also posited that the proposal itself is unconstitutional.
“Article 48 of the state Constitution prohibits certain subjects from appearing on the ballot,” the group said in a statement to lawmakers on Monday. “An appropriation of money is one of them.”
“Therefore, the extra revenue that supposedly would be generated by this tax would NOT go directly to education, repair of roads and bridges, public transportation, etc. as proponents falsely claim – instead it would all go directly into the general fund to be spent at the Legislature’s discretion, as is all other revenue,” the group said.
As an example, the advocacy group that brought the state Proposition 2 ½ in 1980 cited a near doubling in the state gas tax in 1990, ostensibly to raise funds for road and bridge repair. While the 10-cent a gallon tax raised about $120 million, it said, just $7.4 million was used for roads and bridges.
The measure’s official language states:
“To provide the resources for quality public education and affordable public colleges and universities, and for the repair and maintenance of roads, bridges and public transportation, all revenues received in accordance with this paragraph shall be expended, subject to appropriation, only for these purposes.”
Language in the state Constitution relating to petitions states in part that “no measure… that makes a specific appropriation of money from the treasury of the commonwealth shall be proposed by an initiative petition.”
The Budget and Policy Center’s Berger asserts that a history of case law indicates that the revenue can be earmarked.
“There are other parts of the state constitution where money has been earmarked for certain things, like transportation, and those have been upheld,” he said.
Humason said that semantics are figuring heavily regarding the legality of the petition.
“It’s not allowed, so supporters are going to try to be creative with the language and suggest rather than stipulate,” he said.