High Court’s Decision on Millionaires Tax Buys Time – But Massachusetts Needs A New Game Plan

Printed from: https://newbostonpost.com/2018/06/19/high-courts-decision-on-millionaires-tax-buys-time-but-massachusetts-needs-a-new-game-plan/

The people of Massachusetts have dodged a missile on a technicality.

The Massachusetts Supreme Judicial Court ruled Monday that a referendum asking voters to approve a 4-percentage-point income tax surcharge on incomes of $1 million or more violates the state’s constitution because it links three items that aren’t related:  income tax rate, transportation, and public education.

The 1917 state constitutional convention required that ballot questions only contain provisions “which are related or which are mutually dependent.” That’s so voters can evaluate one proposal instead of having to swallow multiple items shoehorned into one referendum.

The court majority’s interpretation of the state constitution is correct. It was made on legal, not political, grounds, which is right and proper. (And, for Massachusetts, refreshing.)

But the substance of the millionaires’ surtax proposal is still disturbing, all the more so because it will probably return in some altered form.

It rests on two false assumptions.

The first is that Massachusetts suffers from a revenue problem.

Massachusetts’s state budget for the fiscal year that begins July 1 will top $41 billion. Our state government’s per capita spending is in the top 10 in the country – and second highest among highly urban, highly industrialized states.

Moreover, the money sought to be raised wouldn’t solve any problems in the long run, since when Massachusetts state legislators see money they run to spend it on unions and state pensions. Were the money to appear, it wouldn’t widen many roads, fix many bridges, or solve education problems. We could expect more state college administrators and more state senators and those connected to them filling those open “jobs.”

The second false assumption is that if you tax rich people at a high rate, you’ll get a lot of money out of them. Almost by definition, rich people have options. One of them is to figure out how to establish residency in states with no income tax, like Florida and New Hampshire. An 80 percent increase in state income tax rate (from 5.1 percent currently to 9.1 percent if the referendum had passed) is more than enough incentive for high-income earners to flee the Commonwealth – meaning that over time we’d end up with far less tax revenue than forecast and we’d be chasing out the very people whose entrepreneurial skills and investments drive the economy.

As Jim Stergios, executive director of the Pioneer Institute, said, “the Commonwealth has avoided an economic disaster” because the proposed constitutional amendment “would have re-created the Taxachusetts brand” and would have “accelerated the out-migration of high-earners and some businesses, and roped in an ever-expanding number of taxpayers.”

Many politicians engaged in hand-wringing on Monday, seeing the millions of dollars slipping through their fingers. This is disheartening.

Public officials in Massachusetts need a primer on how economic growth works. Soaking the rich isn’t it.