Legislature passes Fair Share amendment again
June 9, 2021
By: Shira Schoenberg
The Massachusetts Legislature on Wednesday passed a constitutional amendment raising taxes on income over $1 million, the final vote needed to put the measure on the November 2022 ballot.
The Fair Share Amendment, also referred to as the millionaire’s tax, would raise the state tax rate by 4 percentage points on income over $1 million.
It passed 159 to 41, largely along party lines, with Democrats supporting the bill and Republicans opposing it. Among House members, the vote was 121 to 39 with nine Democrats joining all Republicans in opposition. In the Senate, the vote was 38 to 2, with Republican Patrick O’Connor joining Democrats in support.
“The reason why the Fair Share amendment is so popular is that most people recognize that our wealthiest residents can afford to pay a bit more in taxes to help fund investments that expand opportunity and make our Commonwealth more just and more equitable for everyone,” said Sen. Jason Lewis, a Winchester Democrat and the amendment’s sponsor.
The amendment has support from a wide range of Democratic and liberal-leaning groups, who say the state needs more money to fund education and transportation, and taxing the wealthy is the fairest way to get it. But passage came over the objection of the state’s Republicans, business groups, and conservative organizations, who warned that it could stymie business growth and cause wealthy residents to flee the state.
Republican House Leader Brad Jones, of North Reading, said passing the amendment would be “betraying the trust of the voters” because it would never be able to deliver on all the promises being made to voters.
The Raise Up Massachusetts Coalition, a coalition of labor, clergy, and liberal organizing groups, has said the amendment would raise $2 billion through the tax hike. Now, every Massachusetts worker pays a flat tax rate of 5 percent. This would raise the rate to 9 percent on income over $1 million beginning in 2023, with the $1 million threshold adjusted annually for inflation. The money would be go toward public education and transportation.
Cindy Rowe, executive director of the Jewish Alliance for Law and Social Action and a coalition member, said on a Zoom call that the amendment is about investing in a future that benefits everyone in Massachusetts, regardless of income level. “People who make $1 million and those who are surviving on far less will all benefit from living in a state that educates people to be part of a stellar workforce and provides a functioning transportation system,” she said.
Merrie Najimy, president of the Massachusetts Teachers Association, said too few high-income individuals today are “hoarding an incredible amount of wealth,” even as the state needs money to invest in things like making public higher education affordable.
State Rep. Jim O’Day, a West Boylston Democrat who sponsored the amendment, said on the House floor that Massachusetts continues to struggle with structurally deficient bridges, inadequate MBTA funding, and crumbling school buildings. Responding to concerns by business owners that the tax increase would make Massachusetts less competitive, O’Day said, “their businesses couldn’t run in this Commonwealth if we didn’t have roads and bridges there were safe and secure.”
But opponents counter that higher taxes will hamper business growth. “Additional taxes will make it harder for Massachusetts businesses to get our people back to work — especially as the adoption of remote work has lowered barriers to relocating jobs outside the state,” 150 business leaders wrote in a letter organized by the Massachusetts High Technology Council.
On Tuesday, the conservative-leaning Beacon Hill Institute and Massachusetts Fiscal Alliance released a study, which found that passing the tax would lead to a loss of 4,400 working families, who could be expected to leave the state, and 9,300 jobs, due to a reduction in hiring and the decision of some higher-income workers to retire early or work fewer hours, by 2023. The study estimates that the tax would cost $963 million in real disposable income and result in $431 million less in gross domestic product.
While proponents say the measure will raise $2 billion a year, based on Department of Revenue estimates, the Beacon Hill Institute says the projection does not account for the likely contraction of the state economy. The think tank predicts actual revenue will be close to $1.2 billion.
“The proponents don’t bother to figure out what the tax will do to the state economy,” said David Tuerck, president of the Beacon Hill Institute. “If the tax shrinks the state economy as we know it would, then the increase in tax revenue will be much less than claimed.”
The free market Pioneer Institute think tank argues that Connecticut and California adopted policies aimed at taxing the wealthy more – then saw substantial outmigration as businesses and wealthy taxpayers moved out. The organization notes that the rise in remote work due to the pandemic means businesses and workers are more mobile than ever.
Opponents note that higher income workers already pay more in taxes. Senate Minority Leader Bruce Tarr said tax filers earning over $1 million in 2017 paid an effective state and federal tax rate of 33 percent – compared to an average rate of 19 percent for other taxpayers. On a state level, Tarr said, 0.5 percent of state taxpayers paid 24 percent of all state income taxes. “That apparently is something we’re trying to fix in the name of tax fairness,” Tarr said.
Opponents also say there is no guarantee state funding will actually increase for education and transportation, since the money raised from the millionaire’s tax could simply supplant existing state funding in those areas, freeing up that money to be used elsewhere.
The anti-tax group Citizens for Limited Taxation noted that five prior attempts to pass a graduated income tax on the ballot failed. It argues that amending the Constitution is not the way to pass what it calls “dubious” tax policy – since repealing it would then take four years.
Phineas Baxandall, senior analyst at the Massachusetts Budget and Policy Center, said the Beacon Hill Institute study does not account for the benefits to the economy of having an improved education and transportation system. “It’s by definition one-sided, then it makes all sorts of speculative, unrealistic assumptions about problems,” Baxandall said.
Baxandall said rich people are actually less likely to move than poorer people, as they tend to have families, businesses, and are rooted in their communities. “One of the benefits of being rich is you get to live where you want to be,” he said. “You’re not having to chase opportunities the way poorer people are.”
The idea for the millionaire’s tax was first proposed in 2015. It almost made it to the ballot in 2018, but the Supreme Judicial Court ruled that that the way it was constructed was unconstitutional. Proponents got around the constitutional issues this time by having the proposal introduced through a legislative process rather than a citizens’ amendment, which has different rules.
Andrew Farnitano, a spokesperson for the Raise Up Massachusetts Coalition, said the group anticipates running a “modern 21st century campaign,” with field organizing as well as TV, radio, and internet ads. “We expect this to be significant campaign,” Farnitano said. “We know there will be some opponents who don’t want to pay their fair share and will spend money to block that. We’re confident we’ll have the ability to make sure voters hear from both sides.”