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Council in the News

Don’t tinker with surplus tax-rebate law

By Lowell Sun Editorial       

May 7, 2023 at 1:00 a.m.

House Speaker Mariano
Gov. Maura Healey announces a proposed tax relief package during a press conference at the Demakes Family YMCA on Monday, Feb. 27, 2023 in Lynn. (Nancy Lane/MediaNews Group/Boston Herald)

It seems a fair share works when applied to imposing an extra tax on the state’s highest earners, but not when it comes to putting excess state revenue back in the pockets of those most contributing to that surplus.

That millionaires tax ballot measure, narrowly passed in last November’s general election, assessed an additional 4% levy on state incomes exceeding $1 million, beyond the 5% flat tax everyone pays.

Supporters of that amendment to the state constitution maintained those 1-percenters should pay more, simply because they earned more.

But to the Democrat-controlled House, that same logic doesn’t apply to repayments of excess income-tax collections.

The House’s $56 billion-plus spending-plan proposal for fiscal 2024 includes language that would change Chapter 62F of the General Laws, a previously obscure, rarely used provision of the tax codes, which last year unexpectedly delivered nearly $3 billion in surplus state revenue back to taxpayers.

Sprung on unsuspecting lawmakers by Gov. Charlie Baker, it returned roughly 14% of individual and joint filers’ total state income tax burden.

It seemed only right that the people who paid higher taxes should receive the largest refunds.

After all, that constitutes their fair share of the excess revenue pot.

But that didn’t square with many Democrats on Beacon Hill, who believed those taxed the least shouldn’t be held to the same standard.

Seeing another chance to pinch the rich, Democrat lawmakers want to rewrite Chapter 62F, which in their view would level the wealthy’s uneven playing field.

Not so fast, intoned one of state’s major pro-business organizations.

The Massachusetts High Tech Council has warned lawmakers not to alter the tax rebate law, stating such action would violate the Massachusetts constitution.

Passed in 1986 through a voter-approved ballot measure, changing the law via the Legislature would circumvent the expressed will of the electorate, according to the Council.

“The proposed change to Chapter 62F would not only alter a law that was approved by the voters, but it would also violate the state’s Constitution with a tax credit formula not authorized by the current flat-tax requirement.

“Given this concern, any tax reform bill which reaches the Governor’s desk and is signed into law should refrain from altering Section 6 of Chapter 62F,” High Tech Council President Chris Anderson said in a written statement.

The House’s unanimously passed spending proposal would change Chapter 62F by removing the portion of the law that guarantees the issuance of rebates based on the amount of taxes paid. As written, the budget would instead have any rebate evenly distributed to all state residents without regard to tax burden.

While supporting some form of tax relief, in a letter to the governor and legislative leaders, the High Tech Council said lawmakers will have to find another way to do it.

“The High Tech Council applauds the Governor and the House for pursuing significant tax relief for Massachusetts residents and employers and hopes the Senate will take up those reforms. However, given the significant constitutional concerns raised in the enclosed memo, any tax reform bill which reaches the Governor’s desk and is signed into law should refrain from altering Section 6 of Chapter 62F.”

The Council said it reached this position after consultation with Boston attorney Kevin Martin from the law firm Goodwin Procter.

“It is obvious from the face of the proposed amendment that it is ‘intended to tax the same class of income at different rates,’” Martin wrote in a legal memo. “The proposed amendment therefore would violate Article 44’s uniformity requirement.”

House Democrats not only want to change Chapter 62F, they also apparently want to lower the chance of any future tax rebates for their constituents.

By a 132-25 vote reflecting their super majority, House Democrats rejected a Republican-proposed amendment to remove a section of the budget that exempts millionaires tax receipts from counting as revenue under Chapter 62F.

Gov. Maura Healey’s $55.5 billion budget plan also includes that millionaires’ surtax exclusion.

It seems the Democrats want it both ways – assess the wealthy at a higher rate, but essentially take their excess income-tax payments and spread them around to everyone.

To the High Tech Council, an organization comprised of CEOs and senior executives representing technology companies, professional services firms, and research institutions, that’s not a winning message.

As their members likely see it, rewriting that tax refund law won’t help the state’s — and this group’s — efforts to create and sustain conditions that support investment, job growth, and improved quality of life in Massachusetts.

We’d urge the Democrat-controlled Legislature to find another way to ease their constituents’ tax burden, and refrain from sending mixed signals to job creators and businesses thinking of expanding or relocating in Massachusetts.