Business & Tech

How a tax on millionaires could affect the minimum wage

Waiters, waitresses, and other hospitality industry workers rallied at the State House Tuesday to seek a higher minimum wage.
Keith Bedford/Globe Staff
Waiters, waitresses, and other hospitality industry workers rallied at the State House Tuesday to seek a higher minimum wage.

Non-millionaires of Massachusetts take note: The Supreme Judicial Court’s forthcoming decision on the so-called millionaires’ tax may well affect you, even if you earn far less than seven figures.

No matter how the court rules on the proposed ballot question, which would impose a 4 percent surtax on individuals’ annual incomes over $1 million, the decision will have a ripple effect on three other potential ballot measures being negotiated together as part of a complex “grand bargain”: a sales tax reduction from 6.25 to 5 percent, paid family and medical leave, and raising the minimum wage to $15 an hour.

If the court finds the millionaires’ tax unconstitutional and keeps it off the ballot, the Retailers Association of Massachusetts is expected to drop its push for the sales tax decrease. Without the potential for extra revenue from the millionaires’ tax, more formally known as the surtax on income, to offset the loss of revenue from the sales tax reduction, observers say, it would be harder to pass the sales tax measure.

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The income surtax could pump $1.9 billion a year into state coffers if it passes, supporters say; if the sales tax decrease is approved, it could eliminate an estimated $1.25 billion in revenue.

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Dropping the sales tax could also be used as a bargaining chip to get concessions on the minimum wage increase. And if a deal is struck before the SJC decision comes down, which could be any day, that chip holds even more power.

After months of negotiations, both sides are close to reaching an agreement on paid leave, according to members of the negotiating team. But it’s unclear if that issue will be decided separately from the minimum wage and sales tax.

The Senate president and House speaker asked the groups involved in the three questions to negotiate them together in an attempt to keep them all off the ballot in the fall — and keep public policy decisions out of voters’ hands. (Because the income surtax is a constitutional amendment, it can’t be decided by the Legislature.)

Boston communications consultant Joe Baerlein, who has worked on ballot campaigns for more than two decades, said he has never seen so many issues intertwined in such a complex way. “I can’t remember this happening in my lifetime,” he said.

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Negotiations have ground to a halt as the retail association and others in the business community await the SJC’s decision, according to Raise Up Massachusetts, the coalition of labor, faith, and community groups backing paid leave, the minimum wage increase, and the millionaires’ tax.

In an attempt to jump-start the conversation, Raise Up issued a letter last week accusing the retailers group of insisting on “anti-worker changes” to the minimum wage bill that would create a lower minimum wage for teens or eliminate time-and-a-half pay on Sundays.

Raise Up also put together a series of rallies this week to drum up support for its measures. On Monday, the coalition joined demonstrators from the Poor People’s Campaign who sat down in a busy intersection downtown, snarling traffic during the afternoon commute, to bring attention to issues affecting impoverished residents. On Tuesday, restaurant workers gathered at the State House to support raising the tipped minimum wage from $3.75 to $9 an hour as part of the minimum wage hike. Wednesday, retail and grocery workers are delivering a letter to the Legislature in defense of Sunday overtime pay. And on Thursday, teens and their supporters will rally at the State House to oppose a sub-minimum wage for young workers.

Jon Hurst, president of the Retailers Association of Massachusetts, said he is open to a legislative solution on the minimum wage, but it must eliminate time-and-a-half pay on Sunday for retail workers, which would rise to $22.50 an hour if the minimum wage goes to $15. He also said the sales tax reduction is supported by 70 percent of voters in a recent poll and he is prepared to take it to the ballot, regardless of what happens with the millionaires’ tax.

“Lowering the sales tax will give important relief to low income families, seniors on fixed incomes, and to small businesses,” he said in a statement.

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Governor Charlie Baker supports legislative compromise on the ballot questions and wants lowering the sales tax to be part of the conversation, a spokesman said. He has not taken a position on the millionaires’ tax.

If no agreement is reached, Raise Up and the retail association will continue gathering signatures to get paid leave, a minimum wage increase, and a sales tax decrease on the ballot in November. To qualify, they have to submit a second round of 10,792 signatures per question by July 3.

In a blog post Tuesday, Rick Lord, president of Associated Industries of Massachusetts, which is part of the negotiations, wrote of the “sobering reality” that paid leave and the minimum wage increase were supported by roughly 80 percent of voters in recent polls. Attempting to defeat these questions at the ballot would cost an estimated $10 million per initiative, he said, while a legislative compromise avoids the “one-sided, winner-take-all” ballot process.

Even if a deal is struck, Lord was not exactly upbeat about the outcome.

“We may be able to improve some potentially catastrophic ballot initiatives,” he wrote, “but employers will still ultimately face the unsavory trifecta of mandated paid leave, an accelerating minimum wage, and possibly an income tax surcharge.”

Katie Johnston can be reached at katie.johnston@globe.com. Follow her on Twitter @ktkjohnston.