Massachusetts lawmakers overwhelmingly voted Wednesday to advance a sweeping change to the state tax code to the 2022 ballot, kickstarting what’s expected to be a bruising political debate over whether the wealthiest residents should pay more in taxes.
In a 159-41 vote, the House and Senate gave its approval to a proposed constitutional amendment that would impose a 4 percent surtax on annual personal income above $1 million. The measure could generate billions in revenue that supporters say could improve the state’s schools, roads, and subways.
The Democratic-dominated chambers easily cleared the 101-vote threshold needed to advance the so-called millionaires tax, and ensured that it cleared the last procedural hurdle to go before voters in November 2022, when the governor, each statewide office, and every seat in the Legislature will also be on the ballot.
Wednesday’s vote largely fell along party lines, with all but nine of the 129 Democrats in the House voting for it, along with all 37 Democrats in the Senate. State Senator Patrick M. O’Connor of Weymouth was the only one of 33 Republicans in the Legislature to vote for it.
“Our current tax system in Massachusetts is regressive,” state Senator Jason M. Lewis, a Winchester Democrat who cosponsored the amendment, said from the House floor Wednesday, arguing that Massachusetts’ middle-class and low-income earners are bearing too much of an economic brunt in housing and health care costs. “They are tapped out.”
The Legislature first approved the proposal, 147-48, in 2019 and had to advance it in consecutive legislative sessions before it can make the ballot. If approved by voters, the measure would take effect the following January and reshape the state’s traditional flat income tax rate, currently set at 5 percent.
Beyond that, little is certain. Both sides are already challenging projections of how much revenue the higher tax rate would raise. The same measure was headed to voters in 2018 before the Supreme Judicial Court rejected the ballot question as unconstitutional, raising questions if another legal challenge could emerge. Dueling arguments over how large an impact the tax change could have on small businesses are already percolating.
Opponents include the Massachusetts High Tech Council and other business groups, which have the ability to raise vast sums of money in the coming months to wage a counter campaign.
The Mass. High Tech Council this week already warned that the measure could stall the state’s economic recovery from the pandemic, and sarcastically labeled it the “best economic development policy the State of New Hampshire has ever had.”
Meanwhile, a coalition of powerful labor unions and progressive activists, known as Raise Up Massachusetts, have organized behind the effort for years. A ballot question committee the groups formed has already spent $432,000 since 2019, forecasting the expensive campaign likely ahead.
“The opposition to this is going to turn up the heat and try to find every possible way that they can to discredit what we believe to be a really wise way to secure a future for us here in the Commonwealth,” said state Representative Jim O’Day, a West Boylston Democrat who cosponsored the amendment.
The state Department of Revenue projected nearly six years ago that the measure could generate anywhere between $1.6 billion and $2.2 billion in revenue each year. Since then, the number of millionaires in Massachusetts has jumped to more than 20,000.
Supporters, including labor unions and progressive activists, say those extra billions are badly needed to help finance the state’s new school funding system passed in 2019, which promised hundreds of millions of dollars in additional aid to school districts each year.
House Speaker Ronald Mariano, a Quincy Democrat, and Senate President Karen E. Spilka, an Ashland Democrat, both back the change, saying it would usher in a more “equitable and hopeful future.”
Governor Charlie Baker repeatedly declined to take a position on the tax measure in 2018, but has consistently signaled his opposition to raising taxes, except for funding a new, specific purpose. “I’ve said many times that I don’t think the solution to Massachusetts’ issues or problems is to raise taxes and I’ve said that many times,” Baker said in 2019.
The proposed amendment has long drawn heated opposition from business leaders and others. A study released Tuesday by the Beacon Hill Institute, a right-leaning think tank, and funded by the Fiscal Alliance Foundation, a conservative nonprofit, challenged previous estimates, saying the measure would raise $1.2 billion in its first year and roughly $1.5 billion by 2027.
The study also said that the higher tax rate would cost the state more than 9,300 private sector jobs in 2023, arguing highly paid earners would leave Massachusetts for lower-cost states.
“The first effect reflects how Massachusetts residents would vote with their feet once the amendment was implemented,” the study said.
House and Senate Republicans echoed those arguments Wednesday, warning that the tax change is no panacea. State Senator Bruce E. Tarr, the chamber’s minority leader, wielded props to make his point, brandishing a shoe box labeled the “Tax Alchemy Box,” arguing that mixing various ideas and arguments together will not produce gold.
For example, Tarr argued, while the amendment dictates the newly raised revenue goes toward transportation and education, it makes the money “subject to appropriation,” a technical inclusion that gives the Legislature authority over how it’s spent.
“I respect the goals that they’re trying to achieve,” Tarr, a Gloucester Republican, said of supporters. “But in good conscience I have to sound the warning.”
Wednesday’s vote came at a time when Massachusetts appears flush with cash. State officials said last week that the Department of Revenue collected more than double the tax revenue that it had expected in May. The state has now pulled in $3.9 billion above projections through 11 months of the fiscal year, and $1.36 billion more than it expected to collect for the entire fiscal year that ends on June 30.
State lawmakers this week also sent to Baker a bill that would give them control over how to spend nearly $5.2 billion in federal COVID stimulus money, potentially over several years.