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Massachusetts’ 6-month-old millionaire tax is already up for a change that targets married couples

There’s a $600 million-dollar question confronting lawmakers tasked with hashing out differences in House and Senate versions of tax reform: Should the state crack down on married couples filing taxes separately to skirt the state’s new millionaire tax?

The state’s 6-month-old millionaire tax is expected to bring about $1 billion in new revenues for transportation and education spending this year, but the left-leaning Massachusetts Budget and Policy Center has estimated Massachusetts is leaving $200 million to $600 million on the table each year from married couples filing two single tax returns, each reporting less than $1 million in income, rather than a joint return that triggers the surtax.

Tucked inside the Senate’s plan for relief is a policy proposal that would change that. It would require married couples filing taxes jointly at the federal level to also file jointly at the state level. 

Progressives in support of the change have downplayed the switch as a “technical fix” to “close a loophole.” But fiscal watchdogs are calling it a bit of a bait-and-switch. Elizabeth Mahoney, vice president of policy and government affairs for the Massachusetts High Technology Council pointed out that the language used by millionaire-tax proponents Raise Up Massachusetts and the Fair Share Coalition in promoting the policy last year frequently referred to the surtax’s applying to “individuals” making more than $1 million a year – not couples, households or families.

“This proposal is actually a significant policy change that contradicts all of the assurances made to the voters by the proponents of the new income surtax that it would only apply to individuals earning more than $1 million,” Mahoney told MASSterList.

Cindy Rowe, of the Jewish Alliance for Law and Social Action and a member of Raise Up’s steering committee, said the current policy “creates an incentive for shifting of income between members of a married couple in an attempt to game the system.”

The text of the amendment voters approved in November called for “an additional tax of 4 percent on that portion of annual taxable income in excess of $1,000,000 (one million dollars) reported on any return related to those taxes.”

Conference committee representatives have asked the Healey administration for more information about how the joint-filer language would impact the overall tax relief package.

Families or individuals? Fair Share Massachusetts on its website pushing the ballot question behind the surtax wrote: “Only the wealthiest Massachusetts residents — individuals who earn MORE THAN $1 million per year—will pay more: just 4% on the part of their annual income that is ABOVE $1 million.”

A MASSterList review of campaign materials found most advertising referenced “a person’s annual income” and “those who earn more than a million dollars in a single year.

Erin Tiernan was an Editor and Author of MASSterList.