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Business Group Aims to Kill ‘Millionaires’ Tax’

Oct 19, 2016Boston Globe, Council in the News

By Frank Phillips

The Massachusetts High Technology Council is asking its members to raise $400,000 to lay the groundwork for a Beacon Hill campaign to kill the so-called “millionaires’ tax” ballot initiative before it reaches voters in 2018.

The council, a 130-member trade association that lobbies on behalf of the state’s high-tech industry at the State House, wants to determine the best strategy to persuade Massachusetts lawmakers to reverse their initial approval for the proposed constitutional amendment.

The money will allow the group to build a potential legal challenge and help sharpen its arguments to lawmakers that the tax would damage the state economy.

The measure, which was overwhelmingly approved by lawmakers in May, would impose a 4 percent levy on annual taxable income in excess of $1 million starting in 2019. The proposal needs one more vote in the next legislative session before heading to the ballot.

Advocates for the extra tax on the wealthy, which would pay for education and transportation projects, said they were confident that the council’s assault on their proposal would fall short, noting its arguments were soundly rejected in the first legislative vote this year.

The High Technology Council wants to assemble a legal team to lay out the argument that the petition — created by Raise Up Massachusetts, a coalition of labor unions, faith based organizations, and community activists — does not meet constitutional muster.

It will also use the money to pull together a group of economic advisers to highlight its case that the tax proposal would damage the state’s economy by scaring away businesses and making Massachusetts an undesirable place for job-creating industries to locate.

“We want to make sure we have done our homework in order to assess what our strategy options are,’’ Christopher R. Anderson, the council president, said.

He said the council’s goal is to kill the tax proposal before it becomes a referendum in the state elections two year from now.

A proposed constitutional amendment must win approval from at least 50 lawmakers in two successive sessions when the 200 House and Senate members meet jointly in a constitutional convention.

“Our focus now is entirely on the pre-constitutional convention,’’ Anderson said.

The council faces a steep climb to undo the May vote, which approved the new tax by a better than 2-1 margin and included backing from House Speaker Robert DeLeo and Senate President Stanley C. Rosenberg.

The council argues that the proposal violates a provision in the state Constitution prohibiting initiative petitions from earmarking the revenue they raise for specific budget line items. The “millionaires’ tax” ballot question would direct the money raised to be used for public education and transportation.

Raise Up Massachusetts, which spearheaded the ballot initiative by collecting 157,000 voter signatures in 2015 to qualify for the ballot, argues that Attorney General Maura Healey’s ruling that its petition meets constitutional muster is sound.

Citing case law, the group’s legal counsel says the tax proposal meets constitutional requirements because it does not make line-item appropriations, but rather states that the revenue will be used 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.”

“The mere fact that there are limitations on those funds does not mean it is an appropriation,’’ said Raise Up’s attorney, Peter Enrich, a Northeastern University law professor and an expert in public administration. “It’s not an appropriation until the Legislature identifies a specific sum and makes it available expenditure for a specific purpose.”

The state Department of Revenue has estimated that the tax could generate up to $2.2 billion in additional state revenue in 2019.

Anderson said the High Technology Council is also convinced it can make a strong argument to House and Senate members that there would be unintended consequences to imposing an additional tax on the wealthy.

He argues that the targets of the tax would leave the state and that it would create a serious hardship for Massachusetts public leaders trying to lure firms to locate here.

But another business advocacy group — the liberal leaning Alliance for Business Leadership — argues that the state’s economy depends on a good transportation system and educated workers and that a cash-strapped state government needs to turn to the wealthy to help provide the funding.

“Businesses cannot thrive without safe and reliable infrastructure and a well-educated workforce,’’ said its president, Jesse Mermell. “Raising money from the most fortunate among us is the fair approach to making investments that are good for business and the economy, and are vital to the future of our Commonwealth.”

Lew Finfer, Raise Up’s co-chairman and longtime social issues activist, said the High Technology Council was “shooting itself in the foot” with its aggressive move to keep the voters from making the decision.

“It might help some very high-paid high-tech executives if they can block it from passing, but it would hurt their companies and all other people in the state,’’ he said.

Finfer also noted that the Legislature had heard the council’s arguments already when it voted in May, approving the proposed tax increase by a 136-57 margin.

The state’s existing income tax rate is 5.1 percent for all income levels. Under the new proposal, taxable income over $1 million would be subject to the additional 4 percent tax. That level would be tied to inflation, so the extra tax would continue to apply only to very wealthy people.

Increasingly, the Massachusetts High Technology Council is stepping up to create, execute, and lead critical statewide competitiveness strategies. Fostering a vision for our innovation economy under the MassVision2050 banner, the Council solidifies its position as a thought leader providing valuable insights to navigate emerging technologies, facilitates long-term planning, and reinforces the Council's commitment to excellence and action in the evolving Massachusetts tech-driven economy.

To learn more, contact Council President Chris Anderson.