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Barely a month after Election Day, Galvin floats tweaks to ‘millionaires tax’ to exempt some homeowners

Voters narrowly approved the measure last month, which will add an extra state tax to incomes over $1 million a year.

Secretary of State William F. Galvin intends to tweak the newly approved ballot measure, known as the millionaires tax, to exempt some residents from paying the surtax when selling their homes.Pat Greenhouse/Globe Staff/file

In the first sign that lawmakers may tweak the newly approved ballot measure raising taxes on Massachusetts’ wealthiest residents, Secretary of State William F. Galvin said Thursday he intends to file legislation that would exempt some longtime homeowners from paying the surtax when selling their primary house.

Galvin signed the final certification of the constitutional amendment on Thursday, officially increasing the state’s 5 percent income tax rate to 9 percent on annual income exceeding $1 million, as of Jan. 1.

But while doing so, the Brighton Democrat said he believes it’s incumbent on the Legislature to further clarify how the new law is implemented. He also said legislators, who will have wide sway in deciding where the money is directed, should recognize that concerns over the measure deeply split the state’s electorate before passing Question 1 with 52 percent of the vote.

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“It’s a justifiable tax,” said Galvin, who voted for the measure. “But we should be considerate to people who are caught up in it.”

Galvin’s proposals mark the first attempt at tweaking the divisive surtax to transform it from concept into practice. Legislative tinkering with ballot measures once they pass is fairly common, but lawmakers have up until now been quiet on what exactly they might do to refine the so-called “millionaires tax.”

The measure is designed to fund education and transportation, and has been projected to raise anywhere from $1.2 to more than $2 billion per year. But the ballot measure, by making the revenue “subject to appropriation,” does not guarantee the Legislature will actually increase spending in those areas, and critics have questioned whether Beacon Hill can be trusted to spend the revenue appropriately.

Galvin said he will propose creating a separate trust to where at least a portion of the revenue can flow in order to fund education initiatives. He said he intends to discuss the bill’s specific language with potential sponsors, but believes that the majority of the revenue raised should go toward education, be it on the local or college level.

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“I think the more urgent need is [to ensure] that education has a seat at the table and a clear share of these funds,” he said.

The secretary of state said he is also crafting language that would carve out exceptions for the “one-time profit on the sale of a homeowner’s primary residence, if the homeowner is elderly and income-limited,” according to a Thursday release. He envisions exempting those who sell their primary residence, have lived in it for at least five or 10 years, and meet other income qualifications. That could include those who have successfully applied for a senior abatement on their real estate tax, he said.

At this point, Galvin’s proposals are just that, a proposal. They would need support from Beacon Hill legislators, and, ultimately incoming Governor Maura Healey, to become law. Healey, Senate President Karen Spilka, and House Speaker Ron Mariano all supported the millionaires tax, and both legislative leaders issued noncommittal statements in response to Galvin’s ideas Thursday.

“The House will review any legislation filed next session through the formal legislative process,” Mariano’s office said.

The Raise Up Massachusetts coalition — which led the campaign to pass the millionaires tax campaign, largely funded by teacher’s unions — said in a statement that it is “committed to working with legislators to ensure that every dollar in new revenue reaches our classrooms, campuses, roads, bridges, and transit systems.” On the subject of housing, the coalition reiterated its stance that few home sales will be impacted by the tax “thanks to the many existing deductions that can be taken when a home is sold.”

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Mass Budget, a think tank that supported Question 1, estimated that just over 2,000 home sales notched a capital gain high enough to qualify for the tax last year — though, when combined with other income, the sale of a home could push some residents over the threshold.

A budget expert who has studied the proposal said the impact from exempting lower- and moderate-income seniors would likely be negligible. Evan Horowitz, the executive director of The Center for State Policy Analysis at Tufts University, said the exemption was a “reasonable” move since much of the concern over the tax focused on its impacts on retired homeowners.

And yet, he added that it would not be particularly meaningful policy, since the number of people who would qualify both for the exemption and reach Question 1 territory would be in the dozens or perhaps hundreds.

“The short version is, man, that’s a teeny number,” said Horowitz.

The more meaningful move, he said, would be the separate trust for the surtax revenue. He anticipates the proceeds from the millionaires tax being highly volatile, with windfalls during good economic years and major dips during bad ones. The fund, he said, would serve as a sort of savings account to insulate from shaky economic stretches.

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What the trust wouldn’t do, however, is ensure that the proceeds are additive — that is, that the money goes where Beacon Hill says it will go.

Galvin acknowledged he has yet to clearly define the proposal, but cast the trial balloon as a conversation-starter “so it doesn’t get lost in the activities of January,” when Healey and a new legislature will be sworn in and a new two-year legislative session kicks off.

“There should be an upfront commitment to identifying these funds from the get go,” Galvin said. But he said it’s unclear whether Democratic leaders in the Legislature will have an appetite for legislative changes around the new tax.

“The Legislature may just ignore it,” said Galvin. “But I think they do so at their own peril. And they shouldn’t be allowed to ignore it.”


Matt Stout can be reached at matt.stout@globe.com. Follow him on Twitter @mattpstout. Dana Gerber can be reached at dana.gerber@globe.com. Follow her on Twitter @danagerber6.