Lawmakers will examine state’s taxes — including new revenue
As calls multiply for money to address the state’s transportation and education needs, Senate President Karen E. Spilka is taking some initial steps to examine the tax system — a process that could ultimately find new ways to bring in more cash.
Spilka is launching a group of policy makers, academics, and business specialists from across the political spectrum who will be charged with taking what she calls “a good long hard look at our tax code.” Spilka and Senator Adam Hinds, chairman of the revenue committee, said they want the group to generate ideas that not only would better provide for the state’s policy priorities but also ensure wealthier citizens pay their fair share.
“We must create a more progressive tax framework that reflects the remarkable changes we have seen in the ways we live, work, and shop, and which embraces our ability to innovate well into the 21st century,” Spilka said.
The working group will be formally announced in the coming weeks and could take as long as two years to produce a set of recommendations.
Spilka said the idea grew out of her work on legislation that grappled with the state’s changing economy, including a 2016 law regulating ride-hailing firms Uber and Lyft.
“We are in a new economy right now where new industries are being developed all the time, and we are behind the curve, and there’s been no talk about being more proactive” in figuring out how to both capture revenue generated by these industries but also set appropriate guidelines to improve “the economic development and the job creation” that comes with them, Spilka said in an interview.
Other major goals include adjusting the tax code to address the state’s income inequality, which ranks among the worst in the country, and to “make sure we can meet the number of competing needs which are all demanding our attention, especially that of access to a quality public education for all of our children, as well as transportation, housing, and climate change,” Spilka said.
Asked if the working group meant lawmakers were looking for tax increases, Spilka said not necessarily. She characterized it instead as a way to modernize the state’s tax code “to better capture the new economy.” That could “probably” involve identifying new sources of revenue, Spilka said, but it could also mean lessening the tax burden elsewhere.
“I don’t have a preconceived notion as to how this will come out, but I know we can do better,” she said, noting that the group may work throughout the two-year legislative session so they can be “thorough” in their examination.
While Spilka was coy on whether the effort is geared toward raising taxes, that is certainly the topic on many policy makers’ and activists’ minds, with the state grappling with expensive problems ranging from school spending inequality to climate change to a dilapidated public transportation system. And by including key constituencies at the table the working group format could help create consensus on a topic the Legislature has been reluctant to tackle in recent years.
Of course, the usefulness of the exercise could dim if the House leadership does not sign on to the effort — which the Senate has pitched as a joint undertaking. Spilka said that she has raised it with House Speaker Robert DeLeo and that he is thinking about it. “We will see, but we will go forward nonetheless,” she said.
A spokeswoman for DeLeo referred questions to Representative Mark Cusack of Braintree, the House chairman of the Revenue Committee, who indicated he wants a House-Senate legislative panel to decide tax policy.
“We have a working group. It’s called the Joint Committee on Revenue,” Cusack said. “That’s where the conversation should be taking place.”
Cusack said one option could be to create a subcommittee within the joint committee to tackle the tax code question, as well as hold hearings on the topic.
But Spilka and Hinds plan to move forward with their own group. The Department of Revenue will support its work but not participate directly, according to Hinds, and a spokesperson for the agency said they would “provide information upon request.”
About a dozen participants have signed on to the group so far, Hinds said. Members include representatives from Associated Industries of Massachusetts, the state’s largest employer group, the Massachusetts Business Roundtable, and chambers of commerce from the cities of Worcester and Springfield; left-leaning groups such as the Massachusetts Budget and Policy Center, a think tank, and Raise Up Massachusetts, a coalition of community, religious, and labor organizations.
While the Senate working group is still getting off the ground, local lawmakers and policy specialists have pitched some of their own ideas to generate revenue.
A proposed tax on earnings of more than $1 million is still on the table, even though a ballot initiative was ruled unconstitutional by the courts last year. State lawmakers have introduced legislation that is identical to the ballot question.
It would amend the state constitution to impose a 4 percent surtax on people who earn more than $1 million a year, generating an estimated $2 billion a year in new revenue. But the constitutional amendment process means that, if approved, cash wouldn’t start flowing into state coffers until 2023 at the earliest.
The Massachusetts Budget and Policy Center has suggested a few other ways to make higher earners pay more, without the constitutional headaches: Raise the state’s 5.05 percent income tax for everyone — but also increase the exemptions and credits that go to middle- and low-income households, such as the automatic personal exemption, the $1,000 exemption for each dependent, and the state Earned Income Tax Credit for low-income households.
There has been mounting frustration with the lack of leadership shown by lawmakers on Beacon Hill when it comes to finding money to address pressing policy problems. One recent instance: Massachusetts Bay Transportation Authority officials criticized lawmakers for complaining about a just-approved fare hike but failing to do anything themselves to address the state’s transportation demands.
Education is another area where lawmakers have yet to address how they would pay for ambitious plans to rewrite the state’s troubled education formula.
Behind the scenes some lawmakers are arguing that additional spending on education can be phased in slowly, forgoing the need for new taxes.
But that approach is raising doubts among some observers.
Jim Stergios, executive director of the libertarian-leaning Pioneer Institute, noted that over the past five years state revenue growth has often fallen short of expectations; it is also not as robust as it was when the Legislature first introduced the current school funding formula, he said.
“It would be foolish to bank on the same kind of revenue generation from economic growth that we had in the past simply because it has not materialized in the past five years,” he said, “and to think that somehow magically we’re going to sprout all these shoots of revenues . . . I think is probably reckless.”