SJC Rejects ‘Millionaires Tax’ Ballot Question

By Jon Chesto and Joshua Miller 

JUNE 18, 2018

The Supreme Judicial Court on Monday rejected a ballot question that would have raised the state income tax on Massachusetts’ highest earners and put that money into transportation and education, delivering a crushing defeat for progressive activists and organized labor and removing a volatile issue from this fall’s election.

In a 5-2 decision, the court sided with business groups that argued the proposal was unconstitutional. The measure would have imposed a higher income tax rate for personal earnings above $1 million, a levy that would have brought in an estimated $2 billion in new revenue next year. Without that new money, several top elected officials were already hinting at the need for the Legislature to increase taxes or fees.

The majority of judges agreed with the business groups’ primary legal argument, saying Attorney General Maura T. Healey was wrong to certify the initiative because it had multiple subjects that were not related. The state constitution requires such ballot measures to have subjects that are related or “mutually dependent.”

In the majority opinion written by Associate Justice Frank M. Gaziano, the court said voters who favored the tax increase but not earmarking funds for specific purposes would be in “the untenable position of choosing which issue to support,” and which to disregard.

Gaziano also wrote the initiative did not give voters the ability to choose between transportation or education, if they didn’t want to spend the additional funds on both.

“A voter who commuted to work on an unreliable subway line, but who did not have school-aged children and was unconcerned about public education, might want to prioritize spending for public transportation, without devoting additional resources to public education, but would be unable to vote for that single purpose,” Gaziano wrote. “A parent of young children, who lived in a rural part of the Commonwealth and did not own a motor vehicle, would be unable to vote in favor of prioritizing funding for early childhood education without supporting spending for transportation.”

The business groups that opposed the question hailed the court’s decision, which prevented the need for a costly campaign.

“It’s a significant victory that reinforces the constitutional safeguards that were established 100 years ago that expressly forbid certain tactics to be used as an end run around the legislative process,” said Chris Anderson, the president of the Massachusetts High Technology Council.

Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, said: “The court has preserved the state’s ability to make deliberative and fiscally sound choices.”

But the unions and activists behind the tax increase were stricken. They had spent several years building support and gathering the signatures needed to get the question on the ballot.

“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 Raise Up Massachusetts coalition said in a 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.”

Public opinion polls found overwhelming support for the ballot question among voters.

Two judges, Associate Justice Kimberly S. Budd and Chief Justice Ralph D. Gants, dissented, saying that by rejecting the initiative, “the court fundamentally interferes with the ability of the people to exercise the constitutionally granted legislative power.”

Retired Supreme Judicial Court judge Robert J. Cordy said the plaintiffs probably overplayed their hand by pushing for too much in one question, rather than simply trying to put an income tax surcharge for higher earners on the ballot.

“It seemed to have been a very politically driven move to try to create something that would be appealing to the public but would have a graduated income tax at the core,” said Cordy, now a partner at the law firm of McDermott Will & Emery. “They clearly erred by trying to make it too sweet, by throwing in unrelated subjects.”

Beyond the ballot question itself, the court decision will have significant ripple effects.

It will remove an issue Democrats had been using against Governor Charlie Baker, who has been careful not to take a formal stance on the question. Both Democratic gubernatorial hopefuls, Bob Massie and Jay Gonzalez, strongly supported the “millionaires tax,” as it’s widely known, and party officials had hoped the question would have boosted turnout among left-leaning voters in November.

The uncertainty about the tax question was influencing negotiations over several other voter initiatives. Raise Up Massachusetts — a coalition of labor, religious and community groups largely financed by union funds —is also pushing a ballot question to raise the minimum wage to $15 an hour and another to mandate paid family and medical leave. Meanwhile, the Retailers Association of Massachusetts is behind one to reduce the sales tax to 5 percent. State lawmakers have been negotiating legislative compromises on all three, a so-called “grand bargain” that would have kept the questions from going on the ballot.

House Speaker Robert A. DeLeo expressed dissatisfaction with the high court’s opinion.

But, he said in a statement, “I understand the decision and remain committed to working towards a compromise solution on the remaining ballot proposals and continuing the House’s efforts on a policy agenda that will keep our Commonwealth moving in the right direction.”

There isn’t much time: The last day to file the final round of signatures for ballot questions with the state elections office is July 3.

The state Department of Revenue had estimated that the millionaires tax would have generated between $1.6 billion and $2.2 billion in additional state tax revenues in 2019.

Now, without the potential of that additional money, “we will need to be creative and take a hard look at potential revenues from new sources to address the very real challenges we face as a Commonwealth,” said outgoing Senate President Harriette L. Chandler.

The state Constitution prohibits the Legislature from imposing an income tax with different rates for different income levels, which is why the ballot question was pursued as a constitutional amendment that requires voter approval. However, state lawmakers are empowered to create any number of new taxes, fees, and assessments.

Boston Mayor Martin J. Walsh, who said he would have supported the ballot question, told reporters Monday that the high court’s decision “puts the burden right back on the Legislature.”

“Nobody ever wants to raise a tax but we have some serious infrastructure issues here in Boston and Massachusetts, whether it’s roads and bridges, whether it’s education,” he said. “We have to figure out ways to close some of those gaps.”

The business groups opposing the tax question, led by the Massachusetts High Technology Council, said it would have hurt the state’s economic climate and scared away entrepreneurs. In court, the groups argued that the wording of the tax effort was unconstitutional, in part because it combined disparate items — education and transportation — into one question, a practice called “logrolling” used to appeal to voters.

But the question’s advocates argued that transportation and education are related because they are “the keys to social mobility,” and moreover, are “chronically underfunded government services.”

The surcharge would have added 4 percent to the tax rate on personal income above $1 million. So the tax on the first $1 million in earnings would be at the current 5.1 percent, and then it would be 9.1 percent on all income above that threshold.