Business

Shirley Leung

The rich who say tax me more

Real estate millionaire Woody Kaplan wants to fix the state’s crumbling roads and bridges.

John Tlumacki/Globe Staff

Real estate millionaire Woody Kaplan wants to fix the state’s crumbling roads and bridges.

They are the rich, but don’t you dare call them filthy or fat cats, if for this reason only: They want to pay more in taxes.

This isn’t guilt. This isn’t even rhetoric. These millionaires are putting their money where their mouths are and backing a ballot petition to raise state taxes on themselves — people who earn more than $1 million a year.

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These deep pockets believe they should carry a heavier burden so government can do more.

“It’s time for us to return to where we once had been before taxes were demonized and government was demonized,” said Arnold Hiatt, former chief executive and chairman of the shoe company Stride Rite.

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Hiatt was among the first to sign the petition, which was certified by the attorney general earlier this month. A coalition of labor unions, religious organizations, and liberal advocacy groups is behind the measure, which could bring an estimated $1.3 billion a year into the state’s coffers. But let’s be real here. It’s easy for them to ask someone else to pay higher taxes.

It’s hardly a tidal wave, but as the gap between rich and poor widens, more members of the upper class — from Warren Buffett to Republican presidential candidates Donald Trump and Jeb Bush — want to close loopholes that benefit the wealthy. There’s even a group called the Patriotic Millionaires with 200 members, including a dozen in Massachusetts, who are pushing for the same thing.

Why would anyone in their right mind want bigger tax bills? For millionaires like Hiatt, it comes down to a simple calculation: Government needs more money if we want an MBTA that works and better schools for all.

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Hiatt remembers a time when people who earned more than $150,000 in this country paid as high as 70 percent in taxes.

“I was delighted. I felt privileged to be in a position to pay,” said Hiatt, who is long retired but continues to draw a seven-figure income from investments. Woody Kaplan feels fortunate too. Real estate made him rich in what he describes as “the second-best way to make money.” The best, of course, is to inherit it.

Kaplan supports the initiative campaign because he wants to fix crumbling infrastructure and improve schools, but he’s not running around trying to persuade folks at the country club to do the same.

“I can’t speak for the wealthy,” he said. “I can only speak for me.”

That’s because not everyone in the 1 percent wants higher taxes. They think they pay enough, or too much. Fix the entire tax code, they say, not just one part. And if anything, the ballot measure risks dividing the country, pitting the rich against the poor.

Kaplan doesn’t buy that theory. “It is already divided in my view, and maybe rightly so,” he said.

In Massachusetts, everyone pays a flat state tax rate of 5.15 percent, and under the proposed tiered structure, all earnings over $1 million would be taxed 4 percentage points higher.

‘I can’t speak for the wealthy. I can only speak for me.

’Woody Kaplan, on taxes  
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So if you made $2 million, you would pay an increase of $40,000 in state taxes. But since state taxes are deductible on federal returns, the net state tax increase is roughly $27,000, or just a little over 1 percent of their income. For the other half, that’s a long weekend in Nantucket.

Kaplan wouldn’t divulge his annual income but acknowledged he would pay more taxes if the ballot petition succeeds. “Big deal,” he told me. “It has no effect on my life at all.”

But something does bug Kaplan. And it’s this: how voters have to take matters into their own hands, because elected officials are too afraid to raise taxes.

“It is a symptom of the Legislature of having either not the courage or not the good sense to alter the tax policy in the first place. Maybe both. I think they are scared to death of the electoral pushback,” Kaplan said. “It’s not a way to enforce tax policy by initiative petition. This is their responsibility.”

The ballot question specifies that extra revenue be used only for public education, public colleges, and the repair and maintenance of roads, bridges, and public transportation.

It’s hard to be against that.

“There is certainly a consensus in the business community we need these investments, but the question is how do we pay for it,” said Phil Edmundson , chair of the Alliance for Business Leadership, a progressive group. “This seems like the least bad way of doing it.”

Changing the tax rate would hit Edmundson’s bottom line, too. He counts himself as among the 14,000 households in Massachusetts that draw incomes of more than $1 million annually.

How will he cope?

“I will probably just save less,” said Edmundson, chief executive of the Boston insurance agency William Gallagher Associates.

Even if enough signatures are gathered by the end of November, no doubt there will be a contentious fight to raise taxes of any kind.

The Legislature must then vote over two sessions on whether to allow the tax code to be amended by ballot petition. The soonest the millionaire tax measure could get on the ballot is in 2018.

If the rich want to pay higher taxes, no one should stop them. But ultimately it won’t be up to them.

Shirley Leung is a Globe columnist. She can be reached at shirley.leung@globe.com. Follow her on Twitter @leung.
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