A 2nd try at a surcharge on the wealthy
Welcome to the Millionaires Tax Showdown, Part 2. It could get ugly.
The two sides last faced off in court. They’re girding for battle again on Thursday — this time before a legislative committee in the State House’s cavernous Gardner Auditorium, where lawmakers hold hearings that they know will drag on for hours. Wear comfortable clothes, folks.
In 2018, the Massachusetts Supreme Judicial Court nixed a ballot initiative that would have imposed a millionaires tax — aka the Fair Share amendment. The majority of SJC judges sided with business groups that argued the question was unconstitutional because it packs multiple subjects — a new income tax surcharge on the wealthy, increased spending on transportation and education — into a single ballot measure.
The supporters, led by the Raise Up Massachusetts coalition, have changed tactics with an important tweak. The previous proposal was submitted as a citizens’ initiative. This time, it was introduced as a petition by state lawmakers. That one change should nullify the “relatedness” argument about multiple subjects that the business associations used to block the initiative. Legislative petitions, it turns out, are allowed to contain more than one concept.
Otherwise, the song remains the same: a surcharge of 4 percentage points on the state’s income tax, for earnings above $1 million. As with the first version, the anticipated windfall — perhaps as much as $2 billion a year — would be dedicated to education and transportation purposes.
Because this surcharge requires a change to the state’s constitution, it would need majority votes in successive two-year legislative sessions before heading to the voters. The earliest you’d see it on the ballot is November 2022.
Raise Up now has home-court advantage. “Fair Share” enjoys widespread support in the Democrat-controlled Legislature already. Lawmakers, led by cosponsors Senator Jason Lewis and Representative Jim O’Day, will line up in support on Thursday. At least a dozen Raise Up members will speak in favor. Organized labor, including the powerful Service Employees International Union, helped bankroll the question last time. You can bet union members show their support in the Gardner.
The business groups know this as they head to Beacon Hill. Maybe they can persuade legislators who are on the fence. Leaders from the Massachusetts High Technology Council, Associated Industries of Massachusetts, the Massachusetts Taxpayers Foundation, and the National Federation of Independent Business — all plaintiffs in the previous lawsuit — plan to testify.
They will cite the damage seen in some high-tax states, as companies and wealthy residents vote with their feet, and will predict similar economic carnage here. (Poor Connecticut assuredly will be mentioned as a poster child for wrongheaded policies.)
Opponents will also point to the owners of small- and mid-size businesses who will suffer, particularly those whose firms have earnings that get taxed as personal income. They will remind lawmakers of the big chunk in the state budget that already depends on taxes from high-earners.
And they will question whether the newfound revenue stream will truly be dedicated to new education and transportation spending: What’s to stop the Legislature, they’ll say, from simply cutting back on the preexisting allocations for those important budget items once they have the money from the millionaires tax?
The Fair Share supporters are fired up. Many will come armed with responses to those arguments. Expect a populist theme to emerge. O’Day, for example, says he’s bracing for the challenge from the business world. The folks who have the most money, he says, often don’t want to give up a penny of it.
The business groups haven’t ruled out another lawsuit, either. But that’s a much tougher route now. Instead, their argument will more likely hinge on how well they make their case to state legislators, and then the voters. Let the fun begin.