Colin A. Young
BOSTON – With a House and Senate vote on Wednesday afternoon, the Massachusetts legislature effectively launched an 18-month election campaign around a proposed constitutional amendment to raise taxes for the rich and move away from the state flat tax rate structure.
The House and Senate, united in a constitutional convention to consider proposed amendments to the state constitution as the state chamber remains closed to the public, voted 159-41 on Wednesday to let voters decide in the ballot 2022 whether or not to impose a new 4% surtax on annual household income greater than $ 1 million. The measure needed 101 votes to move forward.
Only one Republican, Senator Patrick O’Connor of Weymouth, voted to move the amendment forward while nine Democrats – Reps Brian Ashe, Ann-Margaret Ferrante, Michael Finn, William Galvin, Colleen Garry, Chris Markey, Angelo Puppolo , Paul Schmid and Jonathan Zlotnik – voted in opposition.
The vote marks the successful conclusion of the legislative process for supporters of the surtax led by Raise Up Massachusetts, the coalition of labor, community and faith groups that has secured minimum wage increases, a new paid and guaranteed family and medical leave program sick leave earned. during the last years. But it also marks the start of a campaign to convince regular Massachusetts voters to dramatically reshape the state’s tax structure.
“Taxpayers at the bottom of the income scale pay a higher percentage of their annual income in state and local taxes than our high-income taxpayers. This is deeply unfair,” said Senator Jason Lewis, who co-sponsored the ‘amendment in the Legislature, said. “The Fair Share Amendment that is before us again today would make our tax system fairer and generate substantial new revenue to support the public investments that are critical to our recovery from the pandemic and building a fairer economy. “
Beacon Hill Democrats have pursued tax policy change for years, and supporters say the surtax could generate $ 2 billion a year, for education and transportation, without tipping the pockets of most residents. The change is proposed as a constitutional amendment because the Constitution currently requires that an income tax be applied uniformly to all residents. The state income tax rate is currently 5%.
If the surtax is approved by the voters, the first million dollars of household income would still be taxed at the rate of 5% and all household income beyond that first million dollars would be taxed at the effective rate of 9%.
Before the vote of the 200 elected officials and senators, the debate on the subject followed the same contours that have defined the question for several years. Supporters like Lewis and Rep. Jim O’Day have argued that the amendment is necessary to tackle income inequality in Massachusetts and to provide a sustainable source of income for education and transportation. Opponents like Minority Leader Representative Brad Jones and Senator Bruce Tarr have warned that the surtax would likely affect more than taxpayers who already report household income above $ 1 million and warned that it could lead to an exodus from the wealthy Bay States.
“We know this will not only affect the people who have incomes year after year of a million dollars, but it will affect the incomes of people who may be small business owners and those who would sell a house. know … that even if that were not true, the question would place the burden of the promise that would be made by this amendment on 20,000 taxpayers – roughly, that number is changing – who have already made evidence of very mobile behavior, ”Tarr says. “In good conscience I have to sound the warning of all things that could happen here that I don’t believe anyone in the Commonwealth of Massachusetts would want to see.”
As unions, progressive organizations and Democratic lawmakers celebrated, condemnation of the Legislative Assembly vote came swiftly on Wednesday afternoon.
Massachusetts Fiscal Alliance spokesman Paul Craney said the Democrats in Beacon Hill “will use today as a rallying cry to raise taxes for the rich and if they are successful they will make sure we are all considered. as rich when taxes are due. “
The Massachusetts chapter of the National Federation of Independent Business said it was disappointed the legislature had advanced the progressive income tax proposal and warned it would hurt small businesses already affected by the pandemic.
“Proponents of the proposal conveniently omitted that many small businesses that present themselves as flow-through entities for tax purposes will be affected by the higher tax rate,” said Christopher Carlozzi, state director of the NFIB. “Business owners who have spent their lives building their businesses, creating jobs, paying taxes, participating in their community, will be penalized by higher taxes when they sell their business to retire.
During his remarks on the ground, O’Day preemptively dismissed similar claims by naysayers, saying that “companies making more than a million dollars, in my opinion, are not small companies.”
The West Boylston representative also rejected the argument that passing the surtax amendment would start a trend for wealthy residents and businesses to pack their bags and leave Massachusetts.
“The fair share amendment has been a topic of discussion for at least eight years in one form or another,” he said. “If corporations and billionaires really wanted to leave – it’s not like we just pulled this out of a bag last night to talk about it, we talked about it ad nauseam – if they didn’t like it here, they would be gone long before now. “
Income surtax, take two
The initial petition that kicked off the surcharge effort was filed in August 2015 by Raise Up. Attorney General Maura Healey certified the constitutional amendment to be ballot-eligible in September 2015, and the Revenue Department concluded that year that it would generate around $ 1.9 billion in revenue per year.
The Democratic-controlled legislature twice approved the citizens’ petition for the 2018 poll despite opposition from Republicans, voting 135-57 in 2016, then 134-55 to advance it in June 2017.
But then the wheels fell off. Three major business groups – Massachusetts High Technology Council, Mass. Taxpayers Foundation and Associated Industries of Massachusetts – filed a lawsuit, which made its way to the Massachusetts Supreme Court. In June 2018, the SJC dismissed the ballot question, ruling that it had badly mixed up two different spending priorities and a major change in tax policy.
The state constitution allows own-initiative petitions to contain only “related” or “mutually dependent” subjects, and the lawsuit argued that the proposed surtax inappropriately grouped unrelated subjects of a government tax. progressive income and expenditure on education and transport.
Democrats circumvented that rule this year by asking lawmakers, who are not bound by the same restrictions, to file the petition directly.
In June 2019, members of the House and Senate voted 147-48 in favor of the amendment, settling to send the question to voters with their vote on Wednesday.
In addition to letting the income tax rate drop in small increments in recent years to 5%, the level approved by voters in a 2000 poll question, Beacon Hill has largely avoided changes to the two big taxes. state – sales and revenue – since 2009, when lawmakers raised the sales tax rate from 5% to 6.25%.
Wednesday’s vote came as Massachusetts was teeming with cash. Legislative leaders and the governor are fighting an uphill battle for control of approximately $ 5.2 billion in federal funding for the American Rescue Plan Act and the Department of Revenue is set to raise nearly $ 4 billion more tax revenue than the Baker administration anticipated. fiscal year.
The November 2022 poll
Changing the income surtax could become something of a center of gravity for Massachusetts’ 2022 election cycle, especially in the gubernatorial race.
Ben Downing, a former Democratic senator running for governor, said on Wednesday he was eager to work to push through the ballot issue in 2022 and called it “an opportunity for us to start addressing the inequalities that plague our state and to build a fairer country, stronger Massachusetts for the 351 cities and towns. “
Gov. Charlie Baker has not said whether he intends to run for a third term in 2022, nor has he set a clear position on the income surtax. Baker’s office did not offer a response to Wednesday’s vote, but the Republican governor is generally not in favor of tax increases.
All of the state’s constitutional offices and the 200 seats in the Legislative Assembly will also be on the November 2022 ballot, and Mass. Fiscal suggested that is when voters could let Democrats who proposed the surtax amendment know what they think.
“Voters should not forget or forgive this level of greed and they will have another chance to hold them accountable in 2022,” Craney said.
Supporters of the surtax were confident to go to the polls in 2018, too, before the SJC derailed that campaign. Raise Up and legislative sponsors said after Wednesday’s vote they were confident the question would indeed be put to voters next year, but acknowledged the campaign would be long and deadly.
“We think we’re on really solid ground, but I’m sure the opponents of this are going to look under any boulder, any boulder, to try to find some kind of way to keep themselves from paying their fair share. “O’Day told reporters in the hallway outside the House chamber. “They are, obviously, who will have the capacity to throw a ton of money at this problem and that is probably how they are going to try to beat it. They would rather spend $ 100 million to defeat this rather than spend an extra $ 40,000 or $ 50,000 in taxes It doesn’t make a lot of sense to me if you want to be a good neighbor.
Chris Van Buskirk and Michael P. Norton contributed to this report.