The Legislature on Wednesday overwhelmingly endorsed a constitutional proposal to raise taxes on the very rich, setting the so-called millionaires’ tax on track to go before voters in 2018.
After a fiery debate that offered a preview of the arguments for and against the levy — the urgent necessity of new cash to boost education and transportation in Massachusetts; the folly of a constitutionally unsound “penalty on success” — 135 of a combined 200 senators and representatives voted for the measure. Fifty-seven voted against it.
Only 50 votes were required to move the measure forward. And if the push garners 50 votes in the next two-year legislative session, it will go before voters on Nov. 6, 2018.
Notably, the vote split Democrats, with several fiscally conservative representatives and senators voting against the measure.
But most in the majority party favored moving the effort forward, and several made an impassioned case for what proponents frame as a “fair share” tax. They see the move as part of a larger effort to address the massive gap between the very wealthy and everyone else in Massachusetts. They hope to provide resources needed to create a transportation system that can get residents to work reliably and an education system that can help students land jobs without accruing crippling debt.
“People hate taxes, we get it,” said Senator Karen E. Spilka, an Ashland Democrat. “But people should also hate the idea that our children may not be getting an adequate education to prepare them for competing in our globalized economy. They should hate the fact that their loved ones may waste hours of their lives commuting, and going on unsound bridges.”
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.
Republican leaders offered several amendments to the proposal, all of which were rejected. They also offered a barrage of arguments against the measure.
The constitutional language aims to direct the new infusion of revenue to only transportation and education. But Senator Bruce E. Tarr, the chamber’s top Republican, questioned whether the wording of the proposal would actually mean lawmakers could spend the cash as they saw fit.
Tarr also brought up the argument that wealthy people might just leave the state, making the new stream of revenue extremely unstable. He questioned the wisdom of substantially increasing taxes on those who are “among the most mobile in the Commonwealth in terms of their ability to move capital, move their residence, and avoid taxation all together.”
And the Gloucester Republican contended that the new tax would be a “penalty on success” and would send the message that, in this state, if you achieve success, “the reward is nearly a doubling of your taxation.”
House Republican Leader Bradley H. Jones Jr. framed the new levy on the rich as a “Trojan tax horse.” That’s because money is fungible and, he said, there’s no guarantee that the new cash will be spent in addition to money already spent on transportation and education, not in lieu of it.
The state Department of Revenue estimates that the constitutional change would generate between $1.6 billion and $2.2 billion in additional state tax revenues in 2019. The agency estimates that 19,500 returns will be affected. That’s about 0.5 percent of all returns filed with the department.
The millionaires’ tax came before the Legislature on Wednesday after Raise Up Massachusetts, a coalition of religious, community, and union groups, gathered over 157,000 signatures to put the measure on the ballot.
“It’s absolutely clear we need to invest in improving our public schools, repairing crumbling roads and bridges, making high-quality, debt-free public college an option, and strengthening our public transportation systems,” Deb Fastino, a co-chair of Raise Up, said in a news release.
But Paul Craney, executive director of the Massachusetts Fiscal Alliance, expressed worry that the effort would open the door to more taxes on everyone. “And when the tax doesn’t generate the expected revenue,” Craney said, “that million-dollar threshold will crash down on the rest of us.”
Polling has found voters very favorable to the idea of the surtax on the rich.
But history is on the side of opponents.
Voters have previously rejected five proposals to change the Constitution to allow for a graduated state income tax: In 1962, 1968, 1972, 1976, and 1994.