Proposed tax on high earners gets warm reception on Beacon Hill
A measure to revive a statewide tax on high earners received a glowing reception on Beacon Hill Thursday, suggesting an easy path ahead despite staunch opposition from business groups.
“We are in desperate need for revenue for our districts,” said Senator Michael D. Brady of Brockton, one of the proposal’s more than 100 sponsors and a member of the Joint Committee on Revenue, which convened a hearing on the proposal Thursday. “We’ve got to move as swiftly and as responsibly as we can on this.”
The hearing kicked off Round Two for progressive activists and legislators pushing to create a new income tax on the state’s highest earners. Years of work on a previous ballot initiative were dashed at the eleventh hour when the Supreme Judicial Court ruled the measure was unconstitutional because it combined multiple subjects that were not related.
The goal remains the same: generate much-needed cash — supporters say $2 billion annually — to plow into education and transportation with a surcharge of 4 percentage points on the state’s income tax for earnings above $1 million.
“We have tremendous unmet needs in our Commonwealth that are hurting families, hurting our communities, and putting our state’s economic future at risk,” said Senator Jason M. Lewis of Winchester, the lead sponsor of the Senate version of the proposal. Low- and middle-income families in Massachusetts are “tapped out” with the high cost of living here, while “these super-wealthy families can afford to pay slightly higher taxes and continue living in the great state of Massachusetts,” he said.
The revival of the so-called millionaires tax comes as the Legislature has started to engage in a broader debate about how it might find more money to address a list of pressing policy concerns. Senate President Karen E. Spilka has launched a task force of outside experts to study overhauling the tax code. House Speaker Robert A. DeLeo has said “it’s all on the table” when it comes to figuring out how to address the state’s transportation difficulties and has left the door open to potentially pursuing other measures this year. Both leaders support the tax on high earners.
The earliest the tax, known as the Fair Share Amendment, could kick in is 2023, given the procedural path it must travel, since imposing it requires changing the state Constitution. The tax would need majority votes in successive two-year legislative sessions before heading to the voters; the governor would not have a say.
The previous proposal, nixed from the 2018 ballot, was submitted as a citizens’ initiative. This time the proposal was introduced as a legislative petition introduced by Lewis and Representative Jim O’Day of West Boylston. The procedural difference, supporters and their lawyers say, should avoid the “relatedness” challenge in court, since legislative petitions don’t have to meet that standard.
The business groups that defeated the earlier proposal are mounting their fight again, though it remains to be seen if they will bring new court challenges. At Thursday’s hearing, they came armed with arguments that hiking taxes on the state’s highest earners would drive entrepreneurs — and the jobs and tax revenue they create — out of the state, as well as unfairly harm small- and mid-sized business owners whose business income passes through their individual tax returns.
“Look, we’re trying to prevent Massachusetts from becoming Connecticut,” said Christopher Anderson, president of the Massachusetts High Technology Council, referring to ongoing budget woes and population loss that Massachusetts’ neighbor to the south has suffered in recent years. Connecticut, he noted, lost more than 20,000 residents with a total adjusted gross income of $2.6 billion following tax increases in 2011 and 2015.
Christopher Carlozzi, Massachusetts state director for the National Federation of Independent Business, said the tax on high earners would mean small business owners of modest means would have to give a big chunk of their retirement nest eggs to the state when they sold their businesses. “Taxing small business . . . would strongly inhibit business growth,” he said.
Democrats on the revenue panel were not having it. Their exchanges with the business witnesses grew testy at times, with lawmakers bristling at the view put forward by some of the business officials that the state’s highest earners already pay their fair share of taxes.
“Do you suggest we tax the poor?” Representative Susannah M. Whipps, an Independent of Athol, demanded from the panel of business representatives. “I’m a business owner, I expect to pay more taxes than my employees.” Noises of approval and applause from Fair Share Amendment supporters for her words drowned out the response from a business witness.
Senator Joanne M. Comerford challenged the evidence presented by the business groups that taxes on high earners leads to economic distress, offering competing data that she said showed several states with special taxes on high incomes had strong economies.
“This is a head scratcher for me. The states with the highest concentration of millionaires have millionaires’ taxes,” she said.
Peter Enrich, a tax specialist at Northeastern University and general counsel for Raise Up Massachusetts, the coalition of labor, faith, and community groups that had brought the high-earner tax forward, said he believes the second stab at implementing it is on solid legal footing.
“I don’t doubt the creativeness of those who would like to keep this off the ballot,” said Enrich, who worked for former governors Michael Dukakis and William Weld. “I imagine they will come up with some argument, but we cannot visualize what they will be and there’s no reason to think that they will have any substance.”
Supporters of the tax offered testimony about both the fairness of the approach as well as the need for the revenue it would generate.
Middle school history teacher Alex Hoyt told legislators that he was allowed the equivalent of only one sheet of paper per student each day because of budget constraints.
“No millionaire risks sliding down the ladder of opportunity because 4 percent of their income after the first million is redistributed to schools serving families who may not even make that 4 percent,” he told lawmakers. But it could mean a ladder of opportunity for the children of those families, he continued. “Please build those rungs for them. They’ll do the climbing.”