Liberal groups propose higher tax for top earners

Ballot measure would aid transit projects, schools

A coalition of labor unions, religious organizations, and liberal advocacy groups say they will press for a ballot measure that would hike taxes on the wealthy and direct more than $1 billion a year to education and transportation.

The proposed amendment to the state constitution, if it clears a series of legal and political hurdles and wins voter approval in 2018, would amount to a substantial revision of the state's tax code. It would scrap a flat state income tax — everyone currently pays at a rate of 5.15 percent — and create a two-tiered system, with all earnings over $1 million taxed at a rate 4 percentage points higher.

"Asking these high-earning individuals . . . to pay their fair share would allow us to improve our schools, make public higher education more affordable, and fix our crumbling transportation system," Raise Up Massachusetts, the group behind the amendment push, said in a statement to the Globe.

The measure could face stiff resistance from antitax advocates and business groups. And Governor Charlie Baker, soaring in public opinion polls, signaled Wednesday that he would oppose the effort.

Baker spokeswoman Lizzy Guyton, in a statement to the Globe, did not address the proposal directly but said, "Governor Baker does not support tax increases on our hard-working families."

About 14,000 Massachusetts taxpayers reported taxable income of $1 million or more in 2013, the last year for which a breakdown is available. Many of them were clustered in Boston and wealthy suburbs such as Newton, Wellesley, and Weston.

US Census data show Massachusetts is one of the most economically stratified states in the country. It is one of eight states with a flat state income tax rate.

Massachusetts voters have repeatedly rejected efforts to impose a graduated income tax, with steeper rates for taxpayers the higher they climb the income scale. The last effort, in 1994, lost by a two-to-one margin.

But proponents say the new proposal is simpler — a tax on millionaires. And they argue the public mood has shifted substantially since the 1990s. "That was a different time," said Harris Gruman, a Service Employees International Union official and cochairman of Raise Up Massachusetts. "People didn't feel as threatened by economic insecurity."

The Great Recession and mounting concern about income inequality have sparked interest in so-called "millionaires' taxes," with about a dozen states raising rates on their highest income brackets since 2009.

The Massachusetts advocates say the new revenue would allow the state to reverse what they say is chronic underinvestment in areas such as early education and public transit. "That would help a lot of families around Massachusetts," said Noah Berger, president of the left-leaning Massachusetts Budget and Policy Center. "It would also strengthen our economy in the long run."

Dedicating the revenue to transportation and education offers some political advantage; voters are less likely to give lawmakers a big new pot of money to spend as they like. But there are questions about the legality of the move. The state constitution bans any amendment making "a specific appropriation."

Advocates say earmarking the funds for broad categories of spending such as transportation and education stops short of a "specific appropriation." And Cheryl Cronin, a lawyer for the coalition, which is still drafting the precise language of the amendment, says she is confident the final version will meet constitutional muster.

The group must file its language by Aug. 5 with Attorney General Maura Healey, who will make a determination on its legality.

If Healey signs off, advocates will have to collect 64,750 signatures to proceed. Then one-quarter of the state Legislature must vote to push the measure forward, in two consecutive legislative sessions, before it can go to the voters in November 2018.

Senate President Stanley C. Rosenberg and House Speaker Robert A. DeLeo, who have been briefed on the proposed amendment, declined to comment Wednesday. But the proposal has support in at least some corners of the Legislature.

State Representative Jay Kaufman, a Lexington Democrat, says he has a counter on his cell phone ticking down the days to the potential voter referendum. On Wednesday, it stood at 1,203. "This is critical for the economic future of the Commonwealth, and I think it's critical for our sense of who we are as a people," he said.

Supporters of the flat income tax rate laud its simplicity and argue that its broad application instills a measure of fiscal discipline in the electorate and the Legislature.

But liberals have long called for a graduated tax that would shift more of the burden onto higher income taxpayers.

The income tax rate currently stands at 5.15 percent and will decline to 5 percent over time, in line with a state formula, if economic growth remains strong. The proposed constitutional amendment would add 4 percentage points to that base — boosting a 5 percent rate to 9 percent, for instance — for salary and investment income over $1 million.

The amendment would index the $1 million threshold to inflation, ensuring that it rises over time. That provision, organizers say, is designed to spare middle-class families from the higher tax rate as their incomes rise.

If the measure passes, Massachusetts' top rate would be one of the highest in the country, according to figures compiled by the Tax Foundation, a non-partisan think tank based in Washington. But it would not be the highest: California, for instance, has a top rate of 13.3 percent.

Raise Up Massachusetts organizers say the income tax measure, which they've labeled the "Fair Share Amendment," is part of a broader effort to level the playing field. Last year, the organization played a key role in successful campaigns to hike the state's minimum wage and guarantee paid sick time for most workers.

The coalition includes some of the most powerful unions in the state: SEIU, the Massachusetts Teachers Association, the American Federation of Teachers-Massachusetts, and the Massachusetts AFL-CIO.

Other groups on the organization's steering committee include the Coalition for Social Justice, Progressive Massachusetts, and two faith-based organizations: Massachusetts Communities Action Network and the Jewish Alliance for Law and Social Action.