(781) 786-2662

Diminished Threat of Legal Challenge as “Millionaires Tax” Returns

Apr 11, 2019Council in the News, State House News Service

By Chris Lisinski


The last time activists pushed for a surtax on income above $1 million, it was more or less expected that the proposal would face a legal challenge. But now, less than a year after the Supreme Judicial Court invalidated a citizen’s petition seeking a constitutional amendment to add the 4 percent surtax, proponents are confident that they can avoid the same obstacle.

The crucial difference, they explained in testimony at a Joint Committee on Revenue hearing Thursday, is that the change is now being sought directly by legislators.

Sen. Jason Lewis and Rep. Jim O’Day have filed proposed amendments (H 86 | S 16) that would add a 4 percent surtax on every dollar of personal income above $1 million.

Lewis said the change would only affect 14,000 households across the state, but would bring in as much as $2 billion per year in revenue, which, under the amendment, would be directed specifically toward growing needs in transportation and education.

While the state constitution holds that amendments proposed as citizen initiatives can only include “mutually dependent” matters, amendments filed by legislators do not have to satisfy that requirement, according to Peter Enrich, a Northeastern University law professor. The mutual dependence requirement was a test that the 2018 version drafted by the Raise Up Coalition failed, according to the SJC, because it sought to raise the tax and also allocate how the revenue would be spent.

“There is no ground for a challenge to this matter on grounds of not being sufficiently related, as was the previous metric,” Enrich, who is advising the Raise Up Massachusetts coalition, said at the hearing. “I don’t doubt the creativeness of those who would like to keep this off the ballot. I imagine they may come up with some (legal) arguments. But we cannot visualize what they would be, and there is no reason to think they will have any substance.”

Opponents of the surtax, including those who pushed for last year’s court case, offered no hint Thursday that they would pursue another lawsuit if the measure clears the committee and heads to the Constitutional Convention, where it will need the votes of 101 of the 200 members of the House and Senate in back-to-back, two-year sessions. The question could not reach the ballot until 2022.

Chris Anderson, president of the Massachusetts High Technology Council, noted in his testimony that the amendment has “different legal scrutiny” this time around.

Instead, the council and other opponents focused on trying to persuade lawmakers on the merits, arguing that a constitutionally enshrined higher income tax on top earners would prompt wealthy individuals to leave the state or cut into the viability of small businesses. Anderson warned that other states such as Maryland have seen revenue figures from similar taxes fall short of initial projections.

“Many are surprised to learn that the Commonwealth’s long-term fiscal condition is relatively unstable, but a strong private economy is preventing the Commonwealth from suffering the same flight of employment, capital and tax revenue that we’ve seen in states like Connecticut and New Jersey,” Anderson said.

Because the state constitution calls for a flat tax rate, a formal amendment is required to put a different rate on a higher income bracket.

Supporters argue the current system is “upside-down,” pointing to research that indicates wealthier Massachusetts households pay a smaller overall percentage of their income in state and local taxes than do middle- and working-class ones.

“We have tremendous unmet needs in our Commonwealth that are hurting families, hurting our communities and putting the state’s economic future at risk,” said Lewis, who testified in support of the bill flanked by 29 other representatives and senators. “We have a choice: we can either continue to accept the status quo, or we can do something about it.”

While the proposal drew support Thursday from a handful of local companies, several business groups and anti-tax organizations criticized it as overreaching.

“We can’t conceive of how anything can possibly be more fair than every taxpayer paying an equal tax rate on whatever their income,” the Citizens for Limited Taxation group said in a statement. “The higher one’s income the more in taxes one pays. How can imposing a different tax rate on some and not on others by any stretch be termed ‘fair’? It is the antithesis of fair.”

Ballot-question efforts to amend the state constitution to include a graduated income tax rate, where higher earners pay a higher rate, have been unsuccessful in the second half of the 20th century. However, the most recent “millionaire’s tax” proposal had been fairly popular, including on Beacon Hill. Legislators endorsed it two years in a row with 70 percent support or more support.

Public polls leading up to last year’s thrown-out initiative found significant support among voters, too, as supporters pointed to a $1 billion annual shortfall in education funding and aging transportation infrastructure around the state.

If lawmakers are inclined to support the surtax through the latest legislative amendment, some action will be required quickly. The amendment must be reported out by the Joint Committee on Revenue by April 24 and then added to the Constitutional Convention calendar by May 8, but a vote would not have to take place until the end of formal sessions in July 2020.

House Speaker Robert DeLeo has said as recently as this week that he continues to support the idea of a “millionaires tax,” and Senate President Karen Spilka has also supported the proposal.

Find original article here.

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.