Millionaires’ tax debate focuses on where revenue would go

Advocates pressing an amendment to the Massachusetts Constitution think they have a winning message: Raise taxes on millionaires and use the new cash to fund transportation and education.

They may be right. A recent poll found 70 percent of voters support the expected 2018 ballot effort. And the Legislature is expected to give a preliminary green light to the measure this week.

But opponents believe they’ve found a torpedo that could blow a hole in the hull of the “Fair Share” tax push.

They’ve seized upon a small part of the amendment that they say undermines its whole premise, and would mean the up to $2.2 billion in new yearly revenue could be spent willy-nilly by the Legislature.

“They could appropriate the money to rehab poor kittens and puppies, they could use it to hire everybody’s second cousin who is related to a state rep, they could do a thousand things,” said Chip Faulkner of Massachusetts-based Citizens for Limited Taxation, which opposes the effort.

Proponents insist they are on unimpeachably sound legal footing: The amendment would set the broad parameters for how the Legislature must spend the new money, and lawmakers would then be empowered to make the specific appropriations, but only for education and transportation.

The top lawyer for the group advocating the measure, Peter D. Enrich, called the opponents’ argument “really pretty bogus,” citing constitutional history and decisions from the state’s highest court.

Legal merits aside, should opponents succeed in sowing doubt about what the new revenue would be spent on, it could hurt the expected ballot push. The effort is premised on giving voters a clear sense of who would be taxed (millionaires) and what the money would be spent on (education and transportation).

The state’s current income tax rate is 5.1 percent for all income levels. The amendment would impose an additional tax of 4 percent on annual taxable income in excess of $1 million starting in 2019. And that level would be tied to inflation, so the extra tax would continue to apply only to very wealthy people.

Massachusetts voters have previously rejected five proposals to change the Constitution to allow for a graduated state income tax. But the failed measures in 1962, 1968, 1972, 1976, and 1994 did not include such specificity on how the new revenue would be spent. That allowed opponents to tar the measures as enabling profligate Beacon Hill spending.

Understanding the current debate requires a dive into some legal history.

Massachusetts voters can change the state Constitution by referendum, but they are prohibited from certain categories of amendments. For example, a ballot question can’t undo the rights to free speech or a trial by jury. Referendums also can’t make “a specific appropriation” of taxpayer money, the Constitution says.

So the backers of the millionaires’ tax, a coalition called Raise Up Massachusetts, tried to thread the needle.

The language they wrote reads in part: “To provide the resources for quality public education and affordable public colleges and universities, and for the repair and maintenance of roads, bridges, and public transportation, all revenues received in accordance with this paragraph shall be expended, subject to appropriation, only for these purposes.”

They emphasize there is one historical precedent for a Constitutional ballot question setting a general category of spending for a certain stream of revenue without making any specific appropriations.

In 1974, voters approved an Constitutional amendment that permitted the Legislature to spend money from a highway fund — which included motor vehicle fees and gas tax receipts — for mass transportation, instead of just for highways and bridges.

And the state’s highest court, backers say, has indicated that the effort was constitutionally kosher and also binding on the Legislature. They argue their millionaires’ tax is working under the same rubric.

“That’s the only instance we have where there is a dedication of funds in the Constitution,” said Enrich, who is also a professor at Northeastern University School of Law. “Legislatures don’t have the power to amend, repeal, or ignore constitutional provisions.”

But opponents don’t see a straight line between the 1974 effort and the expected 2018 effort.

“The amendment is not clear cut,” said Eileen Mc-
Anneny, a lawyer and president of the business-backed Massachusetts Taxpayers Foundation, which opposes the tax push.

She said it could well be the case due to the “vague” amendment language that the extra money from the new tax on millionaires “can be used by the Legislature as they deem appropriate. It could be used for transportation and education, but also for many other things not contemplated by voters, too.”

McAnneny said it is important for lawmakers — and the people they represent — to get guidance on what, exactly, the amendment means from the Supreme Judicial Court, before the question goes before voters.

One outside lawyer, not involved in the dispute, also offered words of caution.

Lawrence M. Friedman, a professor of law who specializes in the US and Massachusetts constitutions and teaches at New England Law|Boston, said the drafters have tried to get around the constitutional prohibition against specific appropriations.

“I think there is some question as to whether they have succeeded,” he said. “There is a plausible argument that the Legislature would still have discretion to not spend the money the way the drafters intended.”

The Constitution requires that at least a quarter of lawmakers in two successive two-year sessions of the Legislature approve an amendment before it can go on the ballot.

This week, the millionaires’ tax is expected to comfortably meet that bar for its first vote, legislators say.

Senate President Stanley C. Rosenberg, who supports the amendment, told reporters last week the intention of the push is clear.

“The ‘subject to appropriation’ means we have to appropriate the money to spend on education and transportation,” he said. “That’s how I read, that’s how our lawyers read it, and that’s what we would do, here in the Senate, assuming that gets approved by the voters.”