It’s easy to spend other people’s money.
Especially when most of the other people are rich and their money would go to struggling sectors of the economy that really need the help.
If voters approve Question 1 on the November ballot, the state’s 5 percent income tax would rise to 9 percent on earnings exceeding $1 million. Revenue from the so-called millionaires tax would be earmarked for education and transportation.
With the wealthy paying “their fair share,” the initiative’s sponsors say in their ballot pitch, “every child can go to a great school. We can fix our roads, expand access to vocational training, and make public colleges more affordable.”
That’s the kind of mom-and-apple-pie stuff that only a heartless mogul (Logan Roy, Mr. Potter) could oppose, right? Of course not.
It’s true that the “No on Question 1″ campaign has been financed in good part by moguls and their business groups — a cohort that in this state skews strongly against tax increases, even as many members lean progressive on social issues.
But the ballot measure is flawed, and voters up and down the income ladder and across the political spectrum have legitimate reasons to balk. That includes people who believe deep down, as I do, that the wealthy should pay more in taxes.
At its core, the millionaires tax is a bet of somewhere between $1.2 billion to $2 billion a year on the proposition that better schools and transportation will not only lower obstacles to expanding our knowledge-based economy, but also expand opportunities for lower- and middle-income families.
Here’s the vexing thing about Question 1, which is being funded primarily by teachers unions and other labor groups. It’s easy to spend other people’s money, but it’s infinitely harder to deliver the kind of results Question 1 backers are touting.
We should always be skeptical of simple solutions to complicated problems, and that’s what bothers me about the millionaires tax.
Just take 4 cents on every dollar of income topping $1 million, supporters claim, and our schools will be great, traffic won’t suck, and working families will be better off.
Lots of money alone rarely solves hard problems.
Studies show that smart investments in schools can boost student outcomes. But our state has pumped too many billions of dollars into urban schools with too little to show for it.
Transportation spending is more problematic; there isn’t much evidence that it can appreciably drive economic growth. See: the MBTA.
Without smart planning and effective execution, the new funding could easily go to waste.
Proponents say the surtax would raise “$2 billion a year, every year,” like it was a guarantee.
But tax revenue, especially from the sale of investments and property, fluctuates along with the economy. Moreover, the windfall likely would be substantially less due to tax avoidance strategies and wealthy residents moving out of state.
The Executive Office of Administration and Finance estimates that Question 1 might initially increase tax revenue by $1.2 billion annually, or 2.4 percent of the current state budget.
Whatever the amount, it would be up to the Legislature to decide how the funds are spent.
As Globe State House reporter Matt Stout explained, even if the money is allocated as intended, lawmakers could shift their existing outlays to other budget items. The net effect could be no change in spending on education and transportation.
And often overlooked: Question 1 doesn’t address other festering problems that contribute to the persistence of economic inequality. These include soaring housing costs and the lack of affordable options for low- and middle-income families, high energy prices, and climate change. They aren’t going away.
The “No on Question 1″ campaign has been rightly criticized for scare-mongering. And there is no getting around that some people in the business world think their pockets are about to get picked to fund programs and projects that would benefit unions.
But it has nonetheless enhanced the public debate by making a stink about the unfairness of what the Yes side calls “The Fair Share Amendment.”
It has highlighted the potential impact on “one-time millionaires” ― people whose annual income tops $1 million once when they sell a business or a home that has appreciated significantly in price, or have taken a big retirement account withdrawal.
As my colleague Shirley Leung pointed out, these aren’t people who rake in big money year after year, own homes on Nantucket, or sail their yachts to the Caribbean for vacation.
The number of one-timers is a rounding error out of the state’s roughly 3.8 million taxpayers, but that’s no consolation if you wind up being one of them. And the ranks will grow each year as more households would rotate through the one-timers club.
They should have been exempted, perhaps by applying the surtax only when annual income exceeds $1 million for two or three consecutive years.
Also unfair: Question 1 penalizes a couple filing jointly with combined income exceeding $1 million. Many other taxes lift the individual cap for joint filers.
But the No campaign’s broadest concern is that a surtax on millionaires would hurt the state’s competitiveness by making it harder to attract and retain employers, and accelerate the ongoing migration of affluent residents to lower-tax locales.
Some business leaders say the tax hike wouldn’t spark an exodus from the state. Massachusetts remains a high-tax, high-cost place to live and work — despite a lot of improvement since the 1980s — and still has an enviable economy.
“I think if we had a high-quality transportation system, and we had a high-quality education system, that brings more people into the workforce,” said Mohamad Ali, a Question 1 supporter and chief executive officer of IDG, the Needham-based technology and data company. ”That will offset people who choose to leave.”
Brian Shortsleeve, cofounder and managing director of investment firm M33 Growth, disagrees. Based in Boston, M33 invests in smaller tech and service companies here and around the country, and Shortsleeve said they are all rethinking where employees can live and work.
“I’m very passionate about Massachusetts, but I think from a competitive standpoint, with the backdrop we have now of a remote work, distributed work. . . we ought to trying to bring them here and retain them, as opposed to drive them away with a massive tax hike,” he said.
Backers and detractors of Question 1 agree that it would be a watershed moment, ending the one-rate-for-all policy that’s been mandated by the state constitution since Massachusetts enacted an income tax in 1917.
While the millionaires tax isn’t quite the economic threat its opponents fear, neither is it likely to be quite the boon its sponsors trumpet.
That’s why it’s incumbent upon us to be particularly prudent when deciding how to spend other people’s money.