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Marblehead, Massachusetts 01945
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“Every Tax is a Pay Cut ... A Tax Cut is a Pay Raise”
48 years as “The Voice of Massachusetts Taxpayers”
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their Institutional Memory — |
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CLT UPDATE
Thursday, October 20, 2022
Vote "HELL NO!" on Question
1
All you need to know about the
"Millionaires Tax" ballot question
Jump directly
to CLT's Commentary on the News
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Most Relevant News
Excerpts
(Full news reports follow Commentary)
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On the
Massachusetts ballot this November will be another
attempt by progressive activists to get voters to
agree to something they have repeatedly rejected.
The proposed “Fair Share Amendment” would rewrite
the Commonwealth’s Constitution, which for 106 years
has decreed that income may be taxed only at a
uniform rate. If voters agree, Article 44 of the
Constitution would be changed to allow Beacon Hill
to impose a surtax of 4 percentage points on any
income above $1 million. That would raise the
marginal tax rate on million-dollar earners from 5
percent to 9 percent — a whopping 80 percent
increase.
For at
least three reasons, this is a terrible proposal.
First, it
would punish taxpayers who are not millionaires by
any normal understanding of the word.... These
aren’t plutocrats living high on the hog but
middle-class residents whose “million-dollar” income
is either a one-time anomaly or a mere accounting
convenience....
Second, it
would accelerate the exodus that has been draining
people from Massachusetts for years. The Bay State
is already one of the top 10 states that Americans
are likeliest to leave....
Third,
state government has more money at its disposal than
it has ever had before. It is inundated with cash it
cannot figure out how to spend....
Taxpayers
making $1 million and up earn 22 percent of all
income in Massachusetts. They pay 24 percent of all
income taxes. According to the Department of
Revenue, they account for just one-half of 1 percent
of the state’s 3.95 million tax filers. Yet they
supply nearly a quarter of all income taxes paid....
The
framers of the Massachusetts Constitution knew what
they were doing when they embedded a buffer against
class warfare into the state’s basic charter. Five
times Massachusetts voters have been asked to tear
up Article 44 — in 1962, 1968, 1972, 1976, and 1994
— and five times they have said no. They’ll need to
say no once again this fall.
The
Boston Globe
Wednesday, July 27, 2022
Millionaires tax is unwise and
unworthy
The Massachusetts Constitution contains a barrier
against class warfare.
Will voters tear it up?
By Jeff Jacoby
The fight
over whether to tax incomes over $1 million is
heating up, with both sides taking to the airwaves
to explain to voters why a November ballot question
should or should not pass.
“Politicians are pushing a tax hike on the November
ballot, that makes no sense,” Leo Cakounes, a
cranberry farmer, says in an ad by the Coalition to
Stop the Tax Hike Amendment.
In
November, voters will be asked to decide whether or
not to tax income over $1 million an additional 4%.
Proponents of the measure, in their own ads,
maintain that the money will be constitutionally
obligated for spending on transportation and
education.
“The
pandemic stretched our schools to the breaking
point. Question 1 is a chance to make things
better,” Cynthia Roy, a New Bedford school teacher
says in the ad by Fair Share for Massachusetts. “It
raises $2 billion a year, constitutionally dedicated
to public education and transportation.”
Proponents
further claim that only people making over $1
million a year will be affected by the surtax. The
group opposing the amendment says that’s not
entirely true.
“It would
also tax the sale of small businesses and homes in
Massachusetts,” Richard Schmalensee, an MIT
professor emeritus of economics, said. “Our state
already has the biggest budget surplus in history.”
...
A new
report by the Tax Foundation says that the $2
billion the tax will raise may well be offset by
people leaving the state for lower taxes.
“If
approved, the graduated income tax could contract
the Massachusetts economy by $6 billion by end of
2025,” the foundation’s report reads. “The graduated
income tax amendment is likely to exacerbate the net
outmigration of AGI from Massachusetts as taxpayers
adjust their behaviors to the tax increase.”
The
Boston Herald
Tuesday, September 13, 2022
Millionaire’s tax
debate hits the airwaves
. . . To
bring those issues into the light, this paper will
outline the current tax landscape on which the
surtax would be appended and the ongoing negative
migration trends the surtax could exacerbate;
discuss the findings of important academic research
on income tax changes; and conclude by addressing
the potential long-term consequences the surtax
could have on the people of Massachusetts, including
on residents—the vast majority of them—who would not
owe the tax themselves.
FULL REPORT
Tax
Foundation
Tuesday, September 13, 2022
Massachusetts’ Graduated
Income Tax Amendment
Threatens the Commonwealth’s Economic Transformation
Unlike
many blue states, Massachusetts has resisted the
temptation to raise taxes on high earners. That
antitax fortitude is about to be tested. In November
state legislators will ask voters to approve an
amendment to the Massachusetts constitution adding a
4% surcharge to annual income over $1 million.
Massachusetts is home to arch-progressives like Sen.
Elizabeth Warren and Rep. Ayanna Pressley, but many
voters here remember the 1980s, when the state was
derisively known around the country as “Taxachusetts.”
A series of antitax popular initiatives in the 1980s
and tax cuts enacted by Gov. William Weld in the
1990s reduced Massachusetts’ overall state and local
tax burden considerably. Proposition 2˝, which
limits both the levels and growth of property taxes,
was approved by voters in 1980 and remains
sacrosanct. Among states with income taxes,
Massachusetts’ flat 5% rate is on the low side. In
neighboring Connecticut and New York, the highest
earners pay 6.9% and 10.9% respectively.
What was
Taxachusetts has become New England’s economic
dynamo. Since the 2007-09 recession, wage and job
growth in Massachusetts has outpaced the nation.
Sustained economic growth produced a budget surplus
exceeding $5 billion in the past fiscal year, which
makes it doubly odd to ask voters to approve a tax
hike now....
One might
ask why state legislators, who put this
constitutional amendment on the ballot, are so
determined to return to the bad old days of
Taxachusetts. The proposed tax, according to a Tufts
University estimate, would generate $1.3 billion
annually—a fraction of the surplus generated by
economic growth in the past fiscal year. That tax
revenue would come at a steep cost. Because the
amendment’s definition of income includes capital
gains and “pass-through” income from entities taxed
via individual returns, such as partnerships, sole
proprietorships and S corporations, the proposed tax
would primarily affect retirees and small
businesses....
Haunting
November’s vote is the ghost of the 1980s antitax
movement. In the waning days of the state
legislative session, Gov. Charlie Baker announced
that economic growth has brought the state too many
blessings: Overflowing coffers triggered, for the
first time in 35 years, an obscure 1986 law (itself
passed via initiative petition) that caps state tax
revenue growth at the rate of statewide wage and
salary growth.
So, this
fall, as voters head to the polls to decide whether
to pass the largest tax hike in the state’s history,
they will do so knowing that the state is at the
same time rebating more than $3 billion to 3.8
million Bay State households. House Speaker Ronald
Mariano says he may push to undo the 1986 law
responsible for those rebates. Try that and see what
the electorate does.
For 30
years, Massachusetts has believed that a good
economy is the best way to fund government programs.
But alas, big government always wants more. If
taxpayers lose in Massachusetts, then Florida and
New Hampshire will win—and a firewall against
economic stupidity will fall.
The Wall
Street Journal
Friday, September 9, 2022
Opinion | Commentary | Cross Country
Don’t Make Massachusetts
‘Taxachusetts’ Again
By Jim Stergios
For more
than a month, the campaign championing a special tax
on the wealthy has blasted TV airwaves with a simple
message: “They pay less and we pay more.”
“They” are
the people who earn more than $1 million a year, as
one ad intones and pans to a shot of a businessman
boarding a private jet. The implication is that they
can afford Question 1, a ballot initiative that
would create a 4 percent surcharge on these
millionaires.
Yet the
first ad from the opposition, which debuted last
week, paints a different picture of who could get
hit with the proposed hike: farmers, lobstermen,
small business owners, and even homeowners.
That’s
because “they” include so-called one-time
millionaires. According to an analysis by Tufts
University’s Center for State Policy Analysis, the
pool of wealthy households in Massachusetts changes
dramatically year to year with only about half
consistently earning incomes of more than $1
million. The rest are people who earn more than $1
million just once because of profits they’ve made
from selling a business, home, or long-term
investment.
Leo
Cakounes believes he will fall into that tax bracket
when he gets ready to retire and sells his organic
cranberry farm in Harwich. The 65-year-old stars in
the opposition’s first TV ad, saying that the ballot
question “makes no sense.”
In an
interview, Cakounes, 65, would not divulge how much
more he might pay in taxes, but he says any increase
would be too much. Simply put, for every additional
$1 million he earns, Cakounes would pay an extra
$40,000 in taxes.
He doesn’t
think of himself as rich. Cakounes said that in the
three decades he has operated a farm he has never
made $1 million in a year and chafes at what he
describes as a “this will not affect you” attitude
about Question 1.
“That’s
baloney,” he said. “I’ve worked damn hard to be
where I am today, damn hard. I’ve saved and scrimped
and cut back. Now I am being penalized again when
this goes through.” ...
Ann
Sullivan, who owns Metro Equipment Corp. in
Braintree, also does not consider herself a
millionaire, but she will be classified as one when
she sells her excavation business. She also appears
in a TV ad campaign launched by the opposition,
which is being funded by a coalition of business
groups, and small and big business owners.
Sullivan
figures that if she sells her company and nets $2
million, the first million will be taxed at the rate
everyone pays, which is 5 percent, and then the next
million dollars would be taxed at 9 percent. Instead
of paying $50,000 in taxes on the next million
dollars, she would owe $90,000 if the ballot
question passes.
Although a
$2 million payday may seem like a lot of money to
most people, Sullivan, 61, said the sale proceeds
would constitute her retirement.
“This is
my nest egg,” Sullivan said. “When I stop working, I
stop working. So every dollar is going to count.”
...
At the
heart of the debate over Question 1 is that someone
has to sacrifice for the greater good. Those voting
yes believe the wealthy don’t pay their fair share
in taxes, and the law needs to be changed. Those
against the measure will wonder if it’s fair to only
raise taxes on a small group of people. So far,
polling indicates that Question 1 will pass by a
modest margin.
How should
you vote? It will come down to whether you’re a
millionaire or not, and whether you know one or
expect to earn $1 million in a single year. In an
entrepreneurial economy and a housing market like
ours, the answer is perhaps not that clear.
The
Boston Globe
Thursday, September 22, 2022
There are rich people, and then there are the
‘one-time millionaires’
By Shirley Leung
Should
Massachusetts introduce a new tax on high-income
households — and earmark the revenue for education,
roads, bridges, and public transit? ...
In this
policy brief, we examine additional arguments
for and against the millionaires tax.
Tufts
University
The Center for State Policy Analysis
September 2022
Risks and Benefits of
a Millionaires Tax
“Question
1 is a win-win for Massachusetts: only people who
earn more than $1 million annually will pay more,
and 99 percent of us won’t pay a single penny more,”
says Jeron Mariani, campaign manager for Fair Share
for Massachusetts. “And we’ll all benefit from $2
billion every year that’s constitutionally dedicated
to schools, colleges, roads, bridges and public
transportation. That’s why thousands of educators,
workers, small business owners, parents, faith
leaders, municipal officials, drivers and transit
riders are working together to pass Question 1.” ...
"How many
times do voters need to reject a graduated income
tax before the insatiable Takers accept their
decision?" said Chip Ford, executive director
of Citizens for Limited Taxation, which led
the opposition to and defeat of the last two
attempts to impose a graduated income tax in 1976
and 1994. "They won't be satisfied until they drive
out the productive and strangle the golden goose to
death. Then who'll they pillage?"
“Question
1 is one of the state’s highest-ever proposed tax
increases at a time when our state already has the
biggest budget surplus in its history,” said Dan
Cence, spokesperson for No on Question 1.
“Proponents claim that it will raise taxes only on
Massachusetts’ highest earners, but in reality,
Question 1 would nearly double the income tax rate
on tens of thousands of small business owners,
family farmers, retirees, homeowners and other
Massachusetts residents. We feel strongly that
Massachusetts voters will recognize the harm that
this tax hike will have on our economy and vote No
on Question 1.”
“Voters
must decide this November, if they will go along
with the Legislature’s very deceptive ballot
question, which gives them a blank check to spend
the new tax on anything they want,” said Paul Craney
of the Massachusetts Fiscal Alliance. “The deceptive
ballot question hopes to raise the income tax by 80
percent on some taxpayers and small business owner
that want to retire and sell their business. If
taxpayers think an 80 percent income tax increase is
just too high, they can send the clearest message
this November and vote ‘No’ on Question 1.”
Here’s the
official arguments of the supporters and opponents
as they appear in the Redbook – the book,
distributed by the Secretary of State to households
across the state, that provides Information to
voters on ballot questions....
Beacon
Hill Roll Call
September 26-30, 2022
Ballot Question #1:
Income Tax Hike for Taxpayers Earning More than $1
Million Per Year
By Bob Katzen
Citizens for Limited Taxation (CLT) is warning
voters to be wary of political slogans and campaign
ads concerning Massachusetts Ballot Question 1 on
the November 8 state ballot....
Citizens
for Limited Taxation director Chip Ford said
Question 1 amends the Massachusetts Constitution to
allow lawmakers to raise taxes.
"It's
forever," Ford said. "As a constitutional amendment,
it can never be changed without approval by the
legislature."
Ford said
Question 1 changes the Massachusetts tax structure
from a flat tax system to a progressive tax system.
"Voters
rejected graduated income tax amendments five times
already. What part of 'no' don't they understand?"
he said. "With multi-billions in excess revenue
over-taxation, when is more-than-enough enough?"
WBSM
AM-1420
New Bedford
Tuesday, October 4, 2022
Yes Vote on Massachusetts Question 1
Is ‘Forever,’ Warns Tax Group
By Barry Richard
One
television advertisement touts a proposed surtax on
wealthy residents as a cure for the state’s “teacher
shortage.” The initiative would mean better roads,
another spot says. Nearly every single ad from
proponents says it would raise $2 billion a year.
It
ultimately may. But should voters embrace Question 1
and create a new 4 percent surtax on annual earnings
above $1 million, the decision about where the money
ultimately goes — and who benefits — would rest with
lawmakers on Beacon Hill, who face no obligation to
use the revenue exactly as proponents are pitching.
In
interviews and statements, legislative leaders
offered few assurances about where they, let alone
future legislators, would funnel the proceeds from
the so-called millionaires tax, often citing a
laundry list of needs or competing interests.
The
proposed constitutional amendment would require that
the revenue it raises “only” go toward public
education and transportation. But it also notes that
the money would be “subject to appropriation,” or in
other words, up to lawmakers. That, critics contend,
leaves no guarantee spending on schools or roads or
the MBTA would actually increase because lawmakers
could simply shift other, existing revenue
elsewhere.
Representative Aaron Michlewitz, the House’s budget
chairman, said that if the initiative passes,
lawmakers “should be directing money to those items”
to fulfill the will of the voters.
“We’ll
certainly try to uphold this end of the bargain. But
you can never guarantee anything,” said the North
End Democrat, who voted to put the question before
voters. “You don’t know what the economic outlook
will be. It would be disingenuous to say with a 100
percent guarantee [how it would be spent], with the
idea that we may have to make decisions to offset
other issues.” ...
“Let’s get
it across the finish line and then see what we
actually have,” said Representative James O’Day, a
West Boylston Democrat and a lead sponsor of the
effort to get the question on the ballot. “We’ll
figure out what the proportions are going to be once
we sort of see what that number is.”
Leadership of the Fair Share committee includes an
array of groups, including the Massachusetts
Teachers Association, SEIU 1199, and the Coalition
for Social Justice, among others. But the majority
of the $18.8 million it had reported raising has
come from teachers unions, with the MTA alone giving
more than $11 million as of Tuesday morning....
“These
dollars have to be spent on education and
transportation — and will all be additional dollars
over and above funding that is already provided,”
said Senator Jason M. Lewis, a Winchester Democrat
and a leading sponsor of the measure. “That’s
certainly what I will be advocating for.”
Critics
paint a different, and more nefarious, picture. The
Legislature, they argue, could simply replace the
revenue it would have otherwise spent on education
and transportation with the money raised by the new
tax on high earners, and then push the equivalent
elsewhere — all while keeping those spending buckets
level....
Jim
Stergios — executive director of the Pioneer
Institute, a right-leaning think tank — likened the
proposal to a shell game, with little ability for
the public to track where the money goes
particularly long into the future.
“A
Legislature in 2034 doesn’t really care what the
intentions of a Legislature in 2022 are,” he said.
A
“significant amount” of the new revenue could end up
leaking into other areas, according to one brief
from the Tufts center, and tracking the revenue —
and holding legislators to account — is only made
more difficult by the wide breadth of options for
where the money could be spent.
“There is
this kind of trust question,” said Evan Horowitz,
the center’s executive director, “not just in people
you vote for today but people you envision [voting
for] in the future.”
Legislators also routinely dismissed Republican-led
efforts to affix limits on legislative maneuvering
in the proposed amendment. Representative Bradley H.
Jones, the House minority leader, pushed an
amendment in 2019 that sought to ensure any money
raised would be in addition to money already being
spent. (It was rejected.)
The same
day, Senator Bruce E. Tarr, the Senate’s minority
leader, proposed creating a new fund where the
revenues would automatically be deposited, making it
easier, he argued, to track how they’re spent. That,
too, was defeated.
The
Boston Globe
Tuesday, October 4, 2022
Millionaires tax
proceeds are supposed to bolster education and
transportation.
Lawmakers would decide if they actually do.
Will
small-business owners in Massachusetts get hurt if
voters approve a question on the November ballot to
raise taxes on the wealthy?
TV ads
opposing Question 1 offer an unequivocal yes. But
the latest ad from a coalition that supports the
surcharge argues small-business owners stand to
benefit because the measure will raise an additional
$2 billion annually that can be spent on education
and transportation.
“Small
businesses like ours have struggled during COVID.
Question 1 is a great opportunity to make things
better for everyone,” Karsen Eckweiler says in the
ad. She’s one of the worker-owners of Democracy
Brewing in Boston. “That means more jobs and better
opportunities. That’s good for all businesses big
and small.”
So which
is it? ...
My colleague Matt Stout reported last week that
while the ballot measure designates the revenue to
go towards education and transportation, there’s no
guarantee that lawmakers will actually increase
spending in those areas.
Lewis, however, told the Globe that he will advocate
for the new tax money to “be additional dollars over
and above funding that is already provided.”
The
Boston Globe
Sunday, October 9, 2022
Answers to your questions
about the millionaires tax
By Shirley Leung
Shirley,
your column today on the “millionaires tax” closed
with: "Lewis, however, told the Globe that
he will advocate for the new tax money to 'be
additional dollars over and above funding that is
already provided.'"
Here's
what Sen. Jason Lewis's vow of advocacy is worth:
"House Speaker Thomas Finneran disputes Anderson's
contention that Beacon Hill promised to roll back
the 1989 tax increase once the debt was paid.
"'Maybe somebody at the time said, "Well, gee, maybe
we should or maybe we could consider rolling back,"
but Barbara has been around long enough to know
statements come and go and language is statutory.
I don't know how someone would attach legitimacy to
a comment made in the hall, in a hearing, or even on
the House floor.'"
—
Beacon Hill; June 23, 1997
CLT
finally got the 1989 "temporary
— for just 18 months"
Dukakis income tax hike completely rolled back to
its historic 5% in 2020, thirty years after it was
imposed "temporarily."
Response
to Leung's column
By Chip Ford, CLT
Sunday, October 9, 2022
New
Englanders have long held a slight edge on their New
York neighbors in fiscal sanity (if not always in
baseball). Now progressives in Boston want to join
New York and other nearby states in a high-tax arms
race. Massachusetts voters have the choice to block
a tax hike and preserve a revenue model that works.
Bay State
ballots in November will give voters the choice to
place a 4% surtax on incomes above $1 million,
bringing the top rate to 9% from 5%. The proposal
would amend the state constitution to remove its
flat-tax mandate. Passing the measure would rocket
Massachusetts to seventh from 31st on the list of
states with the highest marginal income-tax
rates....
This
year’s tax haul was so big it triggered a largely
forgotten state law that caps revenue. Residents may
soon receive checks that refund a portion of last
year’s taxes. In other words, Democrats are vying to
raise income taxes at the same time they’re rolling
in an embarrassment of riches. State House Speaker
Ronald Mariano has proposed ending the revenue cap
whether or not voters back the new tax.
Approving
the tax would speed up a wealth exodus already under
way....
The plot
to scrap Massachusetts’ flat tax comes as several
states race in the opposite direction. Arizona,
Georgia, Idaho, Iowa and Mississippi all recently
adopted flat rates on income. Lawmakers in these
states are taking advantage of revenue surpluses to
lay a foundation for sustained growth. Massachusetts
residents have ever more flight options to consider
if the tax burden at home gets heavier.
One irony
is that New England states, which are typically
Democratic when it comes to federal elections,
sometimes choose GOP governors to hold down state
taxes. But Mr. Baker isn’t running for re-election
and Democrats are likely to retake the governorship.
The constitution’s flat rate mandate is a crucial
limit on the demands of interest groups for
ever-more spending. If tax rates rise and the
revenue cap goes away, spending will soar to snatch
the new revenue and soon the politicians will return
to seek even higher rates, as they always do.
Opponents
of the proposed tax hike can take inspiration from
Illinois, where voters in 2020 preserved their
state’s 5% flat tax. To adapt a saying from a
different state: If fiscal sanity can make it there,
it can make it anywhere.
The Wall
Street Journal
Sunday, October 9, 2022
Opinion | Review & Outlook
Massachusetts
Flirts With Tax Masochism
Attorney
General Maura Healey seems to be of two minds when
it comes to taxes....
“We need
tax relief. I have long encouraged the Legislature
to act, both in terms of giving the nearly $3
billion in surplus back to taxpayers, as they are
required to by law, and to pass tax reform,” she
said. “Gov. Baker put forward a really sensible
package on tax reform.”
In
January, Baker proposed tax relief for renters, low
income families, older residents, and changes to
both the estate and capital gains taxes, Healey
reminded the hosts.
“That
needs to happen,” she said. “Again I hope that we
see the Legislature move on that quickly.”
However,
when it comes to taxing high-income residents,
Healey says she will be voting in favor of the Fair
Share Amendment, or ballot Question 1 in
November....
“If
passed, Question 1 would be one of the state’s
highest-ever tax increases at a time when our state
already has the biggest budget surplus in its
history,” said Dan Cence, spokesperson for the
Coalition to Stop the Tax Hike Amendment.
“The
deceptive wording of the question leads voters into
believing that this is uniquely a tax on individuals
earning a million or more dollars annually, but in
reality, the Tax Hike Amendment would nearly double
the income tax rate on tens of thousands of small
business owners, homeowners, family farmers,
retirees, and other Massachusetts residents,” he
said.
The ballot
question, along with Healey’s job application, will
be decided by voters on Nov. 8.
The
Boston Herald
Sunday, October 9, 2022
Maura Healey supports Charlie Baker’s tax cuts, and
also millionaire’s tax hike
Opposition
to this measure has attracted funding from several
prominent names in Massachusetts business circles,
including Robert Kraft’s Rand-Whitney
Containerboard, Suffolk Construction, and New
Balance chairman Jim Davis. Among the proponents of
a yes vote are teachers unions and other labor
groups.
Question 1
has generated the most cash among the four ballot
questions by far: More than $30 million has been
raised in the race as of Oct. 5....
The
Boston Globe
Tuesday, October 11, 2022
Tracking the funders of the 2022 Massachusetts
ballot questions
By Vince Dixon and Christina Prignano
Interactive Listing of Individual Contributions
With less
than a month left for voters to decide where they
will come down on the Constitutional amendment that
would add a 4 percent surtax on annual household
income above $1 million, each side of the argument
made its case before the Charles River Chamber on
Wednesday.
The
question has been years in the making and by Nov. 8
voters will have to decide whether to shift
Massachusetts away from the flat income tax rate
structure enshrined in the Massachusetts
Constitution to allow for the surtax that is
designed to raise money for transportation and
education spending....
Andrew
Farnitano, communications director for Fair Share
Massachusetts, used his pro-surtax argument
Wednesday to emphasize the small number of very
wealthy taxpayers who would be imposed upon to pay
more in taxes and how that revenue would benefit the
state more broadly.
"Regardless of what group we're talking about --
business owners or home sellers or all taxpayers --
this tax is about asking those at the very top, the
top one or two percent of those groups, to pay a
little bit more, just an extra 4 percent on their
second million, to make these really important
investments that we need to make in transportation
and public education, not just next year, but 10,
20, 30 years from now to have the sustainable
revenue we need to make those investments," he said.
Arguing
against the surtax proposal Wednesday was Eileen
McAnneny, the president of the Massachusetts
Taxpayers Foundation, who made the case that adding
a new tax burden on wealthy residents is only going
to harm the state's economic competitiveness and
will drive high earners to lower tax states.
"I think
it's unnecessary at this time," she said.
"Massachusetts has so much surplus tax revenue,
we'll be giving $3 billion of it back to taxpayers.
I also think that this will make Massachusetts less
competitive than it is. And again, our economy is
based on innovation, entrepreneurship, a
highly-talented workforce, and I'm just concerned
given the options they have in this post-pandemic
environment that they'll choose to live elsewhere."
...
A big part
of McAnneny's pitch Wednesday was that it is not
prudent to embed tax policy into the state's
Constitution because making any changes to address
unintended (or unpopular) consequences would require
a complicated four-year process similar to the one
that was required to get the question on this
November's ballot.
"To me,
that's very problematic, because ... at a minimum,
it takes four years to change it, should change be
necessary. And all I would say is, I would point to
how different our economy looks today than it did
before the pandemic, just three short years ago,"
McAnneny said. "And so this essentially does not
allow the Legislature the authority to make any
changes should they become necessary, and in the
Mass Taxpayers [Foundation] view, they will become
necessary."
McAnneny
also zeroed in on what Charles River Chamber
President Greg Reibman called "the one issue that's
going to most confuse voters:" whether the money
raised by the surtax is actually guaranteed to be
spent on education and transportation. She said it
guarantees that more money would flow into the
state's coffers, but not necessarily that more is
spent in those areas.
"Even if
every dime from this surtax goes to education and
transportation as the proponents intend, it doesn't
mean that the Legislature has to continue spending
what they currently appropriate on education and
transportation," she said. "As you all know, money
is fungible. So the money from this can be
guaranteed for education and transportation, but
it's not additive." ...
The debate
hosted by the Charles River Chamber was not the only
surtax-centered event happening Wednesday. At
roughly the same time, another surtax debate was
going on at Salem State University between Max Page,
president of the Massachusetts Teachers Association,
and Dan Cence, spokesman for the Coalition to Stop
the Tax Hike Amendment. That event was hosted by the
Frederick E. Berry Institute of Politics.
State
House News Service
Wednesday, October 13, 2022
Income Surtax
Supporter, Opponent Square Off
At the
dispute’s center is the prospect of many so-called
one-time millionaires — the small-business owner or
retiree finally selling their company or home —
suddenly eating a higher tax bill, all because of a
measure being touted as a way to make our tax system
fairer....
Dan Cence,
a spokesman for the business-backed committee
opposing the question, argued Friday that half of
those paying the tax each year could fall into that
category — “50.5 percent” he said, composed of
people who “don’t consider themselves millionaires.”
“Is that
who we’re going after with this? I thought we were
going after the uber-wealthy?” Cence said during the
debate, hosted by WBUR in partnership with WCVB
Channel 5 and The Boston Globe. “This is people
who’ve worked their entire life for one single event
that would fund their nest egg, fund their
retirement.” ...
The
back-and-forth encapsulated a running dialogue, and
a specific question posed by host Tiziana Dearing,
of what exactly constitutes as fair....
The
measure mandates all new revenue from this tax —
estimated by state officials and proponents to be
anywhere from $1.2 billion to $2 billion annually —
would be earmarked for education or transportation,
albeit subject to appropriation, or legislative
decision-making.
That means
the Legislature will ultimately decide where the
money flows, be it to road projects, the MBTA, or
local school funding within the amendment’s broad
confines. The wording, critics argue, also leaves no
guarantee spending on education or transportation
would actually increase because lawmakers could
simply shift other, existing revenue elsewhere....
“Less than
seven in every thousand people in our state,”
[Andrew Farnitano, a spokesman for the labor-backed
Fair Share committee pushing the ballot question]
said, “who have been the most successful, made the
most money, benefited the most from our economy,
should pay a little bit more.”
The
Boston Globe
Thursday, October 14, 2022
Millionaires tax
debate pivots on who, exactly, would end up paying
new levy
Other
Ballot Questions
Along with
electing candidates to statewide and local offices,
voters will be asked to decide four ballot questions
in November. Two of them – whether to raise income
tax rates on high earners and whether to repeal a
law allowing undocumented immigrants to obtain
driver’s licenses – are fairly clear-cut, even if
the arguments of those on competing sides on the
questions are not. The other two questions, however,
are anything but straightforward....
CommonWealth Magazine
Wednesday, Spetember 28, 2022
Some ballot questions
could draw blank stares
|
Chip Ford's CLT
Commentary |
|
I had intended to keep readers updated step-by-step on the latest
Graduated Income Tax assault, the so-called "Fair Share
Amendment" or "Millionaires Tax" appearing as Question 1
on the ballot. But Boston Globe
columnist Jeff Jacoby's excellent column on it was published
on July 27
— which also was
the very day that big news exploded of CLT's $3
Billion tax cap refund likely
kicking in this year and the political whirlwind erupted. While
the tax cap refund has consumed my every waking moment since
then I've also managed to keep an eye on the Grad Tax ballot question,
following and accumulating news about its progress. I've been
gradually putting it all together over the past week and am finally
able to get it out.
I'm not
going to bury you with much of my usual commentary but just
encourage you to vote NO! on Question 1 and defeat this
deceptive abomination for the sixth time. It's
being thrust on voters by the same cabal of The Takers
as before
—
the usual greedy suspects with unlimited resources and very deep
pockets, primarily the state and national teachers unions with multi-millions
of dollars to invest as always, and the other usual
government employee and service unions.
Interactive Listing of Individual Contributions
The Boston Globe's
Jeff Jacoby closed his July 27 column ("Millionaires tax is unwise and
unworthy") with:
"The
framers of the Massachusetts Constitution knew what
they were doing when they embedded a buffer against
class warfare into the state’s basic charter. Five
times Massachusetts voters have been asked to tear
up Article 44 — in 1962, 1968, 1972, 1976, and 1994
— and five times they have said no. They’ll need to
say no once again this fall."
And I sure hope they do so again!
Citizens for Limited Taxation was founded in 1975 by
Edward F. King specifically for the purpose of opposing and
defeating the fourth graduated income tax scheme (its
previous incarnations were in 1962, 1968 and 1972):
CLT and the voters succeeded in preventing its
adoption. But The Takers never take HELL NO!
for an answer — never.
They resurrected it from the grave once
again in 1994.
Their fifth
assault on the flat tax was presented that time as two ballot
questions. Question 6 was a constitutional amendment
that would replace Massachusetts' historic flat tax with an
outright graduated income tax. Question 7 was meant to
trick voters by establishing statutory income brackets each
with its separate "graduated" tax rate. The constitutional
amendment would have been unchangeable forever.
The various tax brackets would be just a law subject to the whims, fancies,
and greed of the insatiable Legislature, able to be easily changed at
any moment, dividing taxpayers into brackets then hiking one bracket at a time,
never reaching a critical mass of opposition.
It was clearly a bait-and-switch scam. Sneaky yes, nonetheless the voters
weren't suckered, they rejected it once again.
CLT and
Barbara Anderson led the opposition ballot campaign and
defeated for the second time The Takers' fifth graduated income tax scheme on that 1994 ballot.
Now the sixth graduated income
tax scam is on the ballot before Massachusetts voters, disguised as "only on millionaires."
Right, welcome to the millionaires club, folks, it won't be
long before you're taxed too! Once The Takers' collective foot is in
the graduated income tax door, do you believe they'll ever be satisfied?
Barbara Anderson
in 2015 holding one of our 1994 campaign lawn signs,
when we
learned The Takers were back with their sixth
graduated income tax scheme.
CLT News
Release
August 5, 2015
CLT still opposes Grad Tax schemes
|
 |
 |
|
Chip Ford
Executive Director |
|
|
|
The Boston
Globe
Wednesday, July 27, 2022
Millionaires tax is unwise and unworthy
The Massachusetts Constitution contains a barrier against
class warfare.
Will voters tear it up?
By Jeff Jacoby
On the Massachusetts ballot this November will be another
attempt by progressive activists to get voters to agree to
something they have repeatedly rejected. The proposed “Fair
Share Amendment” would rewrite the Commonwealth’s
Constitution, which for 106 years has decreed that income
may be taxed only at a uniform rate. If voters agree,
Article 44 of the Constitution would be changed to allow
Beacon Hill to impose a surtax of 4 percentage points on any
income above $1 million. That would raise the marginal tax
rate on million-dollar earners from 5 percent to 9 percent —
a whopping 80 percent increase.
For at least three reasons, this is a terrible proposal.
First, it would punish taxpayers who are not millionaires by
any normal understanding of the word. As the Pioneer
Institute, a leading Boston think tank, warns, the surtax
would take a painful bite mostly out of senior citizens
selling a home they’ve outgrown or small business owners
whose companies’ income is reported on their individual tax
returns. These aren’t plutocrats living high on the hog but
middle-class residents whose “million-dollar” income is
either a one-time anomaly or a mere accounting convenience.
Second, it would accelerate the exodus that has been
draining people from Massachusetts for years. The Bay State
is already one of the top 10 states that Americans are
likeliest to leave. Those who depart relocate to two states
in particular: Florida and New Hampshire. What do they have
that Massachusetts doesn’t? One feature stands out: Neither
taxes income. Between 2010 and 2020, the amount of annual
income moving from Massachusetts to other states increased
from $422 million to $2.6 billion. Impose a surtax that
makes Massachusetts even more unfriendly to business and
property owners, and that outmigration will only intensify.
Third, state government has more money at its disposal than
it has ever had before. It is inundated with cash it cannot
figure out how to spend. The Legislature just passed a
gigantic $53 billion budget for the next fiscal year, but a
$3.6 billion surplus remains from the fiscal year that just
ended. If Massachusetts were desperately short of funds
needed to keep afloat, there might be a case for raising
taxes. But to do so when revenue is gushing in?
Those clamoring for this surtax insist they aren’t motivated
by greed or envy. Their sole motivation, they say, is that
the wealthy don’t pay their “fair share.” But the data tell
a different story. Taxpayers making $1 million and up earn
22 percent of all income in Massachusetts. They pay 24
percent of all income taxes. According to the Department of
Revenue, they account for just one-half of 1 percent of the
state’s 3.95 million tax filers. Yet they supply nearly a
quarter of all income taxes paid.
It’s true that higher-income people pay a lower share of
their income in total state and local taxes than do those at
the bottom of the income ladder. But that has nothing to do
with income taxes and everything to do with sales and
property taxes. If Democrats and progressives truly wanted
to ease the tax burden of the non-wealthy, they could do so
without tearing up a venerable article of the state
constitution. They could, for example, follow the lead of
New Hampshire and other states that charge no sales tax.
But the reason for the Fair Share Amendment isn’t to ease
anything for anybody. It is to whip up resentment against
the tiny sliver of the state’s population that reports more
than $1 million in income.
The latest publicity release from the left-wing
Massachusetts Budget and Policy Center, a key surtax
advocate, is headlined: “More than 99% of Mass. Residents
Won’t Pay a Penny Toward ‘Fair Share’ Taxes.” An
accompanying flyer emphasizes that even in the most
highly-paid professions, the average yearly income is less
than $1 million. “Relatively few taxpayers,” it assures
voters, “would be subject to a tax increase under the Fair
Share Amendment.” In other words: Vote for this tax because
someone else will be paying.
That is an ignoble sentiment, one of the oldest and most
destructive in history. It doesn’t make society more
prosperous or productive when politicians rail against
“millionaires” and populists scapegoat the “1 percent.” It
makes communal life more precarious. The framers of the
Massachusetts Constitution knew what they were doing when
they embedded a buffer against class warfare into the
state’s basic charter. Five times Massachusetts voters have
been asked to tear up Article 44 — in 1962, 1968, 1972,
1976, and 1994 — and five times they have said no. They’ll
need to say no once again this fall.
The Boston
Herald
Tuesday, September 13, 2022
Millionaire’s tax debate hits the airwaves
By Matthew Medsger
The fight over whether to tax incomes over $1 million is
heating up, with both sides taking to the airwaves to
explain to voters why a November ballot question should or
should not pass.
“Politicians are pushing a tax hike on the November ballot,
that makes no sense,” Leo Cakounes, a cranberry farmer, says
in an ad by the Coalition to Stop the Tax Hike Amendment.
In November, voters will be asked to decide whether or not
to tax income over $1 million an additional 4%. Proponents
of the measure, in their own ads, maintain that the money
will be constitutionally obligated for spending on
transportation and education.
“The pandemic stretched our schools to the breaking point.
Question 1 is a chance to make things better,” Cynthia Roy,
a New Bedford school teacher says in the ad by Fair Share
for Massachusetts. “It raises $2 billion a year,
constitutionally dedicated to public education and
transportation.”
Proponents further claim that only people making over $1
million a year will be affected by the surtax. The group
opposing the amendment says that’s not entirely true.
“It would also tax the sale of small businesses and homes in
Massachusetts,” Richard Schmalensee, an MIT professor
emeritus of economics, said. “Our state already has the
biggest budget surplus in history.”
Massachusetts construction giant Suffolk Construction and
New Balance CEO Jim Davis are among the group behind the “No
on 1” campaign, which proponents say explains their
opposition to the ballot initiative.
“The wealthy investors and super-rich CEOs funding the
opposition to Question 1 are trying to scare people because
they don’t want to pay their fair share in taxes. With
Question 1, small business owners won’t have to pay a penny
more on our company’s revenue. Only individuals who earn
more than $1 million a year in personal income will pay a
little more,” said Gerly Adrien, business director for Fair
Share and owner of Tipping Cow Ice Cream in Somerville.
“But every business in Massachusetts will benefit when our
communities have better schools and colleges that prepare a
well-educated workforce, and a more reliable transportation
system that gets our employees to work and our goods to
market,” she said.
A new report by the Tax Foundation says that the $2 billion
the tax will raise may well be offset by people leaving the
state for lower taxes.
“If approved, the graduated income tax could contract the
Massachusetts economy by $6 billion by end of 2025,” the
foundation’s report reads. “The graduated income tax
amendment is likely to exacerbate the net outmigration of
AGI from Massachusetts as taxpayers adjust their behaviors
to the tax increase.”
Tax
Foundation
Tuesday, September 13, 2022
Massachusetts’ Graduated Income Tax Amendment
Threatens the Commonwealth’s Economic Transformation
By Timothy Vermeer, Senior Policy Analyst
Key Findings
● Massachusetts’ tax advantage in New England is primarily
driven by its competitive individual income tax rate and its
sales and use tax structure.
● The graduated income tax amendment would be paid by many
small businesses, in addition to wealthy individuals.
● The proposed surtax is likely to have negative economic
effects that will impact low- and middle-income earners.
● If approved, the graduated income tax could contract the
Massachusetts economy by $6 billion by end of 2025.
● Massachusetts has seen net outmigration of adjusted gross
income (AGI) since 1993, resulting in $23 billion of AGI
flowing to other states.
● Florida and New Hampshire, two states with no individual
income tax, are consistently the top destinations for net
outmigration of AGI from Massachusetts.
● The graduated income tax amendment is likely to exacerbate
the net outmigration of AGI from Massachusetts as taxpayers
adjust their behaviors to the tax increase.
● Responding to potential negative economic effects of the
surtax by repealing or adjusting the rate would require
another constitutional amendment, which would take years to
accomplish.
Introduction
This November, Massachusetts
voters will decide whether the state’s constitution should
be amended to transition the Commonwealth from a flat rate
individual income tax to a graduated rate tax with a high
top marginal rate. If approved, the amendment would impose a
4 percent surtax on income over $1 million, raising an
estimated $2 billion per year in new revenue.
Proponents of the amendment have framed the issue as a
response to income inequality, with the surtax advertised as
only affecting the wealthiest residents of the Bay State and
thus ensuring that the wealthy pay their fair share. This
motivation is unsurprising in a state known for its
progressive politics, and the Commonwealth’s flat-rate
income tax is anomalous in a tax code that otherwise bears
the hallmarks of progressive taxation. Less publicized are
the compelling reasons to believe the surtax may generate
negative economic consequences that outweigh any social
benefit from additional tax revenue. And there are hints
that the Bay State’s voters care about this too, for the
single rate income tax has had staying power, long favored
by residents.
To bring those issues into the light, this paper will
outline the current tax landscape on which the surtax would
be appended and the ongoing negative migration trends the
surtax could exacerbate; discuss the findings of important
academic research on income tax changes; and conclude by
addressing the potential long-term consequences the surtax
could have on the people of Massachusetts, including on
residents—the vast majority of them—who would not owe the
tax themselves.
FULL REPORT
The Wall Street
Journal
Friday, September 9, 2022
Opinion | Commentary | Cross Country
Don’t Make Massachusetts ‘Taxachusetts’ Again
A proposed millionaire tax would accelerate the exodus of
wealth to New Hampshire and Florida.
By Jim Stergios
Boston - Unlike many blue states, Massachusetts has resisted
the temptation to raise taxes on high earners. That antitax
fortitude is about to be tested. In November state
legislators will ask voters to approve an amendment to the
Massachusetts constitution adding a 4% surcharge to annual
income over $1 million.
Massachusetts is home to arch-progressives like Sen.
Elizabeth Warren and Rep. Ayanna Pressley, but many voters
here remember the 1980s, when the state was derisively known
around the country as “Taxachusetts.” A series of antitax
popular initiatives in the 1980s and tax cuts enacted by
Gov. William Weld in the 1990s reduced Massachusetts’
overall state and local tax burden considerably. Proposition
2˝, which limits both the levels and growth of property
taxes, was approved by voters in 1980 and remains
sacrosanct. Among states with income taxes, Massachusetts’
flat 5% rate is on the low side. In neighboring Connecticut
and New York, the highest earners pay 6.9% and 10.9%
respectively.
What was Taxachusetts has become New England’s economic
dynamo. Since the 2007-09 recession, wage and job growth in
Massachusetts has outpaced the nation. Sustained economic
growth produced a budget surplus exceeding $5 billion in the
past fiscal year, which makes it doubly odd to ask voters to
approve a tax hike now.
Connecticut’s economic arc illustrates the consequences of
high taxes—especially in cold, expensive states that
residents and businesses find easy to leave. In the late
1980s, Connecticut was a comparatively low-tax state,
ranking 17th in the nation in overall tax burden.
Under Gov. Lowell Weicker, a liberal Republican turned
independent, a flat income tax of 4.5% was introduced in the
1990s, and in subsequent decades Connecticut politicians
couldn’t resist adding brackets and raising rates. Now the
state’s overall tax burden is the second heaviest in the
nation and the economic fallout has been disastrous. From
2008 to 2020, Connecticut ranked 49th in wage growth and
48th in job growth. By 2020, it was one of only three states
where employment levels hadn’t recovered to pre-Great
Recession levels.
Connecticut’s raft of tax hikes hasn’t translated into
overflowing tax coffers. In the year after its 2015 income
tax hikes, revenues generated by the state’s 100 largest
taxpayers actually fell 45%. From 2008 to 2022,
Connecticut’s state budget grew by 37%, while
Massachusetts’s pro-growth policies fueled a doubling of the
public fisc.
The Bay State’s budget surpluses are the product of a
competitive tax environment that fuels private-sector
activity. High taxes chase off businesses and jobs and
undermine the goals that progressive taxers say they want to
achieve via public investments. Economic growth lifts all
boats, including the ship of state. The extra money is
proving hard for even Massachusetts’ legislators to spend.
One might ask why state legislators, who put this
constitutional amendment on the ballot, are so determined to
return to the bad old days of Taxachusetts. The proposed
tax, according to a Tufts University estimate, would
generate $1.3 billion annually—a fraction of the surplus
generated by economic growth in the past fiscal year. That
tax revenue would come at a steep cost. Because the
amendment’s definition of income includes capital gains and
“pass-through” income from entities taxed via individual
returns, such as partnerships, sole proprietorships and S
corporations, the proposed tax would primarily affect
retirees and small businesses.
While Massachusetts’ stable tax environment attracts
residents fleeing higher-tax states like New York, New
Jersey and Connecticut, those gains constitute a fraction of
the net outflow of Massachusetts’ people and wealth to
lower-tax states, especially New Hampshire and Florida. Even
without a tax hike, the exodus of wealth from Massachusetts
accelerated sixfold over the last decade. In the aftermath
of the pandemic, states are competing for talent. In the
past two years, 25 states have enacted or implemented
individual and corporate tax cuts.
Haunting November’s vote is the ghost of the 1980s antitax
movement. In the waning days of the state legislative
session, Gov. Charlie Baker announced that economic growth
has brought the state too many blessings: Overflowing
coffers triggered, for the first time in 35 years, an
obscure 1986 law (itself passed via initiative petition)
that caps state tax revenue growth at the rate of statewide
wage and salary growth.
So, this fall, as voters head to the polls to decide whether
to pass the largest tax hike in the state’s history, they
will do so knowing that the state is at the same time
rebating more than $3 billion to 3.8 million Bay State
households. House Speaker Ronald Mariano says he may push to
undo the 1986 law responsible for those rebates. Try that
and see what the electorate does.
For 30 years, Massachusetts has believed that a good economy
is the best way to fund government programs. But alas, big
government always wants more. If taxpayers lose in
Massachusetts, then Florida and New Hampshire will win—and a
firewall against economic stupidity will fall.
— Mr. Stergios is executive
director of Pioneer Institute.
The Boston
Globe
Thursday, September 22, 2022
There are rich people, and then there are the ‘one-time
millionaires’
Opponents of the November ballot initiative that would
raises taxes for some Massachusetts residents are out to
redefine what it means to be wealthy.
By Shirley Leung
For more than a month, the campaign championing a special
tax on the wealthy has blasted TV airwaves with a simple
message: “They pay less and we pay more.”
“They” are the people who earn more than $1 million a year,
as one ad intones and pans to a shot of a businessman
boarding a private jet. The implication is that they can
afford Question 1, a ballot initiative that would create a 4
percent surcharge on these millionaires.
Yet the first ad from the opposition, which debuted last
week, paints a different picture of who could get hit with
the proposed hike: farmers, lobstermen, small business
owners, and even homeowners.
That’s because “they” include so-called one-time
millionaires. According to an analysis by Tufts University’s
Center for State Policy Analysis, the pool of wealthy
households in Massachusetts changes dramatically year to
year with only about half consistently earning incomes of
more than $1 million. The rest are people who earn more than
$1 million just once because of profits they’ve made from
selling a business, home, or long-term investment.
Leo Cakounes believes he will fall into that tax bracket
when he gets ready to retire and sells his organic cranberry
farm in Harwich. The 65-year-old stars in the opposition’s
first TV ad, saying that the ballot question “makes no
sense.”
In an interview, Cakounes, 65, would not divulge how much
more he might pay in taxes, but he says any increase would
be too much. Simply put, for every additional $1 million he
earns, Cakounes would pay an extra $40,000 in taxes.
He doesn’t think of himself as rich. Cakounes said that in
the three decades he has operated a farm he has never made
$1 million in a year and chafes at what he describes as a
“this will not affect you” attitude about Question 1.
“That’s baloney,” he said. “I’ve worked damn hard to be
where I am today, damn hard. I’ve saved and scrimped and cut
back. Now I am being penalized again when this goes
through.”
Ann Sullivan, who owns Metro Equipment Corp. in Braintree,
also does not consider herself a millionaire, but she will
be classified as one when she sells her excavation business.
She also appears in a TV ad campaign launched by the
opposition, which is being funded by a coalition of business
groups, and small and big business owners.
Sullivan figures that if she sells her company and nets $2
million, the first million will be taxed at the rate
everyone pays, which is 5 percent, and then the next million
dollars would be taxed at 9 percent. Instead of paying
$50,000 in taxes on the next million dollars, she would owe
$90,000 if the ballot question passes.
Although a $2 million payday may seem like a lot of money to
most people, Sullivan, 61, said the sale proceeds would
constitute her retirement.
“This is my nest egg,” Sullivan said. “When I stop working,
I stop working. So every dollar is going to count.”
With the state experiencing a record budget surplus and
taxpayers due back nearly $3 billion in refunds, Sullivan
doesn’t understand why Massachusetts needs more revenue. The
millionaire tax is expected to raise an estimated $2 billion
annually, money that Beacon Hill is expected to spend on
education and transportation.
“The state has lots of money now, and now is not the time to
be looking at my nest egg. Just leave my nest egg alone,”
Sullivan said. “Small businesses have enough on their plate.
We’re all trying to recover from two years of misery. We
could use help rather than a hindrance.”
All told, an estimated 26,200 households in Massachusetts
are expected to have incomes of more than $1 million in
2023, according to the Tufts analysis. That represents less
than 1 percent of all taxpayers.
As the debate over Question 1 heats up, voters will also be
confronted with whether the ballot initiative represents a
tax on the middle class. Broadly speaking, no, it doesn’t.
But a segment of the upper-middle class — such as a
household with a mid-six-figure income — could face higher
taxes when they sell a second home, according to a Tax
Foundation analysis released last week. Long-term capital
gains would be taxed at 9 percent, instead of 5 percent.
Still, a tiny fraction of people falls into this category.
Less than 1 percent of Massachusetts home sales result in a
gain of more than $1 million, according to the Massachusetts
Budget Policy & Center.
Let’s be real here. It’s hard to have sympathy for people
who stand to make a lot of money from selling their
businesses or second homes. A team of good accountants and
lawyers can offer advice on how to avoid paying the surtax,
or at least minimize the impact. That’s what rich people do
— and it’s how they stay rich.
At the heart of the debate over Question 1 is that someone
has to sacrifice for the greater good. Those voting yes
believe the wealthy don’t pay their fair share in taxes, and
the law needs to be changed. Those against the measure will
wonder if it’s fair to only raise taxes on a small group of
people. So far, polling indicates that Question 1 will pass
by a modest margin.
How should you vote? It will come down to whether you’re a
millionaire or not, and whether you know one or expect to
earn $1 million in a single year. In an entrepreneurial
economy and a housing market like ours, the answer is
perhaps not that clear.
— Shirley Leung is a
Business columnist.
Tufts
University
The Center for State Policy Analysis
September 2022
Risks and Benefits of a Millionaires Tax
EXECUTIVE SUMMARY
Should Massachusetts introduce a new tax on high-income
households — and earmark the revenue for education, roads,
bridges, and public transit?
Voters will get to decide as part of a November ballot
initiative known as the millionaires tax, which would apply
a 4 percent surtax to annual income over $1 million.
Questions abound. Will this tax drive high-earning residents
out of state? Can it help address racial inequities? Might
the money be diverted for other uses?
In a
previous report, we at the Center for State Policy
Analysis found that the tax would generate roughly $1.3
billion in revenue in 2023 — and that aggressive tax
avoidance would be a bigger challenge than an exodus of high
earners.
In
this policy brief, we examine additional arguments for
and against the millionaires tax.
Beacon Hill Roll
Call
Volume 47-Report No. 39
September 26-30, 2022
Ballot Question #1 - Income Tax Hike for Taxpayers Earning
More than $1 Million Per Year
By Bob Katzen
The first question on the November ballot asks voters if
they favor a proposed constitutional amendment that would
allow a graduated income tax in Massachusetts and impose an
additional 4 percent income tax, in addition to the current
flat 5 percent one, on taxpayers’ earnings of more than $1
million annually. Language in the amendment requires that
“subject to appropriation” the revenue will go to fund
quality public education, affordable public colleges and
universities, and for the repair and maintenance of roads,
bridges and public transportation.
The proposal is sponsored by Sen. Jason Lewis (D-Winchester)
and Rep. James O’Day (D-West Boylston). It qualified to get
on the November ballot when it was approved by the 2019-2020
Legislature and then the 2021-2022 Legislature. If voters
approve the proposal, it will become part of the state
constitution.
The most recent approval was on June 9, 2021 when the House
approved the tax hike 121-39 and the Senate approved it
38-2.
The proposal has been dubbed by sponsors as “the Fair Share
Amendment.” Opponents reject that label and call it another
unnecessary excessive tax.
Supporters say the amendment will affect only 18,000
extremely wealthy individuals and will generate up to $2
billion annually in additional tax revenue. They argue that
using the funds for education and for the repair and
maintenance of roads, bridges and public transportation will
benefit millions of Bay State taxpayers. They note the hike
would help lower income families which are now paying a
higher share of their income in taxes.
Opponents argue the new tax will result in the loss of 9,500
private sector jobs, $405 million annually in personal
disposable income and some millionaires moving out of state.
They say that the earmarking of the funds for specific
projects is a phony sham and argue all the funds will go
into the General Fund and be up for grabs for anything.
“The Fair Share Amendment is a win for all Massachusetts
residents,” said [Rep. James O’Day, D-West Boylston]. “That
is why the list of small businesses, unions and community
organizations that support Question 1 continues to grow. I
encourage everyone to visit fairsharema.com, read the text
of the amendment and learn more about our efforts. If you’re
part of the 99 percent of Massachusetts residents who make
less than $1 million a year, your taxes will not change.”
“I am proud to be the lead Senate sponsor of the Fair Share
Amendment … because it will make our tax system more
equitable by asking the wealthiest households to pay a
little bit more, and it will strengthen our economy by
investing these funds to improve educational opportunities
for all students and help rebuild our aging transportation
system,” said Sen. Jason Lewis (D-Winchester).
“Question 1 is a win-win for Massachusetts: only people who
earn more than $1 million annually will pay more, and 99
percent of us won’t pay a single penny more,” says Jeron
Mariani, campaign manager for Fair Share for Massachusetts.
“And we’ll all benefit from $2 billion every year that’s
constitutionally dedicated to schools, colleges, roads,
bridges and public transportation. That’s why thousands of
educators, workers, small business owners, parents, faith
leaders, municipal officials, drivers and transit riders are
working together to pass Question 1.”
"How many times do voters need to reject a graduated income
tax before the insatiable Takers accept their decision?"
said Chip Ford, executive director of Citizens for
Limited Taxation, which led the opposition to and defeat
of the last two attempts to impose a graduated income tax in
1976 and 1994. "They won't be satisfied until they drive out
the productive and strangle the golden goose to death. Then
who'll they pillage?"
“Question 1 is one of the state’s highest-ever proposed tax
increases at a time when our state already has the biggest
budget surplus in its history,” said Dan Cence,
spokesperson for No on Question 1. “Proponents claim
that it will raise taxes only on Massachusetts’ highest
earners, but in reality, Question 1 would nearly double the
income tax rate on tens of thousands of small business
owners, family farmers, retirees, homeowners and other
Massachusetts residents. We feel strongly that Massachusetts
voters will recognize the harm that this tax hike will have
on our economy and vote No on Question 1.”
“Voters must decide this November, if they will go along
with the Legislature’s very deceptive ballot question, which
gives them a blank check to spend the new tax on anything
they want,” said Paul Craney of the Massachusetts
Fiscal Alliance. “The deceptive ballot question hopes to
raise the income tax by 80 percent on some taxpayers and
small business owner that want to retire and sell their
business. If taxpayers think an 80 percent income tax
increase is just too high, they can send the clearest
message this November and vote ‘No’ on Question 1.”
Here’s the official arguments of the supporters and
opponents as they appear in the Redbook – the book,
distributed by the Secretary of State to households across
the state, that provides Information to voters on ballot
questions.
IN FAVOR:
Written by Cynthia Roy, Fair Share Massachusetts
FairShareMA.com
“By voting Yes on Question 1, you will make sure that the
very richest in Massachusetts—those who make over $1 million
a year—pay their fair share. Current tax rules allow
multimillionaires to pay a smaller share in taxes than the
rest of us. Question 1, the ‘Millionaires’ Tax,’ will make
the extremely wealthy pay an additional 4 percent on the
portion of their yearly income above $1 million.
The additional money is constitutionally guaranteed to go
toward transportation and public education. Question 1 means
every child can go to a great school. We can fix our roads,
expand access to vocational training, and make public
colleges more affordable. Excellent roads and schools help
our small businesses grow, create new jobs and build strong
communities. Question 1 means creating opportunity for
everyone.”
Vote Yes on Question 1. Only the very rich will pay—not the
rest of us.”
AGAINST:
Written by Paul D’Amore, Small Business Representative
Coalition To Stop the Tax Hike Amendment
www.NoQuestion1.com
“Question 1 nearly doubles the state income tax rate on tens
of thousands of small-business owners, large employers and
retirees.
Question 1 treats one-time earnings—the sale of homes,
investments, businesses, pensions and inheritances—as
income. This would suddenly force many residents into the
new, very high tax bracket, depleting the nest eggs of
small-business owners and longtime homeowners whose
retirement depends on their investments.
Record inflation, supply chain difficulties, and continuing
COVID-19 issues make now the worst possible time for massive
tax increases—especially when Massachusetts already has a
giant budget surplus.
There is absolutely no guaranteed revenue from this huge tax
hike would actually increase spending on education and
transportation. Politicians are giving themselves a blank
check, with no accountability.
Organizations representing over 20,000 small businesses and
family farmers urge: Vote ‘No’ on Question 1.”
WBSM
AM-1420
New Bedford
Tuesday, October 4, 2022
Yes Vote on Massachusetts Question 1 Is ‘Forever,’ Warns Tax
Group
By Barry Richard
Citizens for Limited Taxation (CLT) is warning voters
to be wary of political slogans and campaign ads concerning
Massachusetts Ballot Question 1 on the November 8 state
ballot.
"Question 1 would create a four percent tax on the portion
of a person's annual income above $1 million and require –
in the state constitution – that the funds be spent only on
transportation and public education," according to Fair
Share for Massachusetts.
"Only people who earn more than $1 million annually will pay
more; 99 percent of us won't pay a penny more," the group
said.
Fair Share for Massachusetts called its ballot initiative
the "Fair Share Amendment" or a "Millionaires Tax," which
suggests that some are not carrying their share of the tax
load.
According to the Tax Foundation, "Massachusetts has a flat
5.00 percent individual income tax rate. Massachusetts has
an 8.00 percent corporate income tax rate. Massachusetts has
a 6.25 percent state sales tax rate and does not levy local
sales taxes."
Citizens for Limited Taxation director Chip Ford said
Question 1 amends the Massachusetts Constitution to allow
lawmakers to raise taxes.
"It's forever," Ford said. "As a constitutional amendment,
it can never be changed without approval by the
legislature."
Ford said Question 1 changes the Massachusetts tax structure
from a flat tax system to a progressive tax system.
"Voters rejected graduated income tax amendments five times
already. What part of 'no' don't they understand?" he said.
"With multi-billions in excess revenue over-taxation, when
is more-than-enough enough?"
The Massachusetts Supreme Judicial Court struck down an
attempt to place the Fair Share Amendment on the 2018
statewide ballot because it addressed two different issues,
the establishment of a tax and earmarking the revenue for
transportation and public education.
A different version of the amendment passed SJC muster this
year and was approved by the Massachusetts Legislature.
The Boston
Globe
Tuesday, October 4, 2022
Millionaires tax proceeds are supposed to bolster education
and transportation.
Lawmakers would decide if they actually do.
By Matt Stout
One television advertisement touts a proposed surtax on
wealthy residents as a cure for the state’s “teacher
shortage.” The initiative would mean better roads, another
spot says. Nearly every single ad from proponents says it
would raise $2 billion a year.
It ultimately may. But should voters embrace Question 1 and
create a new 4 percent surtax on annual earnings above $1
million, the decision about where the money ultimately goes
— and who benefits — would rest with lawmakers on Beacon
Hill, who face no obligation to use the revenue exactly as
proponents are pitching.
In interviews and statements, legislative leaders offered
few assurances about where they, let alone future
legislators, would funnel the proceeds from the so-called
millionaires tax, often citing a laundry list of needs or
competing interests.
The proposed constitutional amendment would require that the
revenue it raises “only” go toward public education and
transportation. But it also notes that the money would be
“subject to appropriation,” or in other words, up to
lawmakers. That, critics contend, leaves no guarantee
spending on schools or roads or the MBTA would actually
increase because lawmakers could simply shift other,
existing revenue elsewhere.
Representative Aaron Michlewitz, the House’s budget
chairman, said that if the initiative passes, lawmakers
“should be directing money to those items” to fulfill the
will of the voters.
“We’ll certainly try to uphold this end of the bargain. But
you can never guarantee anything,” said the North End
Democrat, who voted to put the question before voters. “You
don’t know what the economic outlook will be. It would be
disingenuous to say with a 100 percent guarantee [how it
would be spent], with the idea that we may have to make
decisions to offset other issues.”
The amendment includes some definition. It would push the
revenue raised toward “repair and maintenance” of roads,
bridges, and public transportation, which could be read as a
prohibition on spending on expansion projects. The revenue
could also go toward “affordable public colleges and
universities,” indicating that its intent is to help keep
the cost of higher education down, and for “quality public
education.”
Still, even in earmarking the revenue for those pockets of
education and transportation, the proposal allows for a wide
universe of possibilities in categories that already account
for billions in annual spending.
Supporters say that could mean dedicating millions of more
dollars to the MBTA as it implements dozens of actions
required following a federal probe. Hundreds of bridges
around the state are in disrepair, they point out.
Legislators repeatedly field calls to help cut the cost of
college in Massachusetts or make early education more
affordable.
But those are options, not commitments. Legislative leaders
also declined to say whether they believe the revenue —
pitched as helping both education and transportation —
should be evenly split, saying the needs from year to year,
as well as the actual amount the surtax raises, could
dictate the division.
“Let’s get it across the finish line and then see what we
actually have,” said Representative James O’Day, a West
Boylston Democrat and a lead sponsor of the effort to get
the question on the ballot. “We’ll figure out what the
proportions are going to be once we sort of see what that
number is.”
Leadership of the Fair Share committee includes an array of
groups, including the Massachusetts Teachers Association,
SEIU 1199, and the Coalition for Social Justice, among
others. But the majority of the $18.8 million it had
reported raising has come from teachers unions, with the MTA
alone giving more than $11 million as of Tuesday morning.
The labor group deferred comment to the Fair Share
committee, whose leadership has not discussed how the money
should be split, said spokesman Steve Crawford.
“We have never had a discussion about individual
priorities,” Crawford said.
Spokespeople for House Speaker Ronald Mariano and Senate
President Karen E. Spilka said neither Democrat was
available for interviews in recent days, and each issued
statements supporting the initiative but offering no
specific promises for where the money would go. Spilka, an
Ashland Democrat, said senators would “turn to the public to
listen, learn, and gather feedback” before deciding what
education and transportation initiatives would benefit.
“These dollars have to be spent on education and
transportation — and will all be additional dollars over and
above funding that is already provided,” said Senator Jason
M. Lewis, a Winchester Democrat and a leading sponsor of the
measure. “That’s certainly what I will be advocating for.”
Critics paint a different, and more nefarious, picture. The
Legislature, they argue, could simply replace the revenue it
would have otherwise spent on education and transportation
with the money raised by the new tax on high earners, and
then push the equivalent elsewhere — all while keeping those
spending buckets level.
It’s a point opponents made before the Supreme Judicial
Court in unsuccessfully pushing to rewrite how the ballot
measure would be summarized for voters.
The committee opposing the measure, funded predominantly by
donations from Massachusetts business leaders, has leaned
into this argument, casting the question as a politician-led
effort to give themselves a “blank check with no
accountability.”
“I don’t trust the politicians with my money,” Ann Sullivan,
who owns Metro Equipment Corp. in Braintree, says in one ad.
Jim Stergios — executive director of the Pioneer Institute,
a right-leaning think tank — likened the proposal to a shell
game, with little ability for the public to track where the
money goes particularly long into the future.
“A Legislature in 2034 doesn’t really care what the
intentions of a Legislature in 2022 are,” he said.
Democratic legislators reject that argument as a red
herring, saying the needs of the state’s schools and
transportation system have, and will, outstrip resources. “I
don’t worry about future legislators ignoring education and
transportation,” said Senator Will Brownsberger, a Belmont
Democrat.
Still, exactly how much money the amendment would raise is a
matter of debate. The left-leaning Massachusetts Budget &
Policy Center estimates the amendment is likely to generate
at least $2 billion annually, but the Executive Office for
Administration and Finance — the budget office under
Governor Charlie Baker, who has said he personally opposes
the tax hike — is less bullish, saying it may generate $1.2
billion “in the near term.” It also said that any revenue
“will vary significantly and unpredictably from year to
year.”
Tufts’s Center for State Policy Analysis estimates the state
would see $1.3 billion in revenue in 2023, but its
projection comes with nuance: The state could see $1.8
billion in direct receipts from the amendment, but it will
also have to contend for an estimated $500 million loss
because of “tax avoidance” or some wealthy taxpayers leaving
the state entirely.
A “significant amount” of the new revenue could end up
leaking into other areas, according to one brief from the
Tufts center, and tracking the revenue — and holding
legislators to account — is only made more difficult by the
wide breadth of options for where the money could be spent.
“There is this kind of trust question,” said Evan Horowitz,
the center’s executive director, “not just in people you
vote for today but people you envision [voting for] in the
future.”
Legislators also routinely dismissed Republican-led efforts
to affix limits on legislative maneuvering in the proposed
amendment. Representative Bradley H. Jones, the House
minority leader, pushed an amendment in 2019 that sought to
ensure any money raised would be in addition to money
already being spent. (It was rejected.)
The same day, Senator Bruce E. Tarr, the Senate’s minority
leader, proposed creating a new fund where the revenues
would automatically be deposited, making it easier, he
argued, to track how they’re spent. That, too, was defeated.
“Because it’s subject to appropriation, there’s no
guardrail. There’s no standard,” said Jones, a North Reading
Republican. “I’ve been around here long enough that I’m sure
a lot of private promises have been made. ‘You’ll definitely
get some of it. You’ll definitely get some of it.’ And
there’s nothing like making $10 billion in promises for $1
billion [in revenue].”
The Boston
Globe
Sunday, October 9, 2022
Answers to your questions about the millionaires tax
By Shirley Leung, Globe Columnist
Will small-business owners in Massachusetts get hurt if
voters approve a question on the November ballot to raise
taxes on the wealthy?
TV ads opposing Question 1 offer an unequivocal yes. But the
latest ad from a coalition that supports the surcharge
argues small-business owners stand to benefit because the
measure will raise an additional $2 billion annually that
can be spent on education and transportation.
“Small businesses like ours have struggled during COVID.
Question 1 is a great opportunity to make things better for
everyone,” Karsen Eckweiler says in the ad. She’s one of the
worker-owners of Democracy Brewing in Boston. “That means
more jobs and better opportunities. That’s good for all
businesses big and small.”
So which is it?
Both ads feature elements of truth, but the devil is in the
details.
It’s true that some small-business owners will get hit with
an additional 4 percent surcharge if they earn an annual
income over $1 million. Typically, this happens when they
sell their businesses. In fact, about half of the households
in Massachusetts that make over $1 million are so-called
one-time millionaires. They earn that kind of money just
once because of profits they’ve made from selling a
business, a home, or long-term investment.
So let me put a finer point on this: Not every small
business or homeowner will pay the extra tax. Some will, but
they represent a tiny fraction of all taxpayers.
Will that distinction be enough to help you decide how to
vote?
But wait, there’s much more to deliberate. I’ve heard from
many readers who have asked excellent questions about who is
and isn’t affected by Question 1, how the money will be
spent, and why we need extra revenue when the state budget
is enjoying a surplus.
Here are answers to frequently asked questions about the
so-called millionaires tax proposal:
Q. Can a good accountant or financial planner help “one-time
millionaires” minimize the impact of the surcharge?
A. Yes, it’s possible. But there is only so much you can do,
according to financial experts. When selling a business,
home, or property, you can spread the profits over more than
one tax year in what is known as an installment sale.
But you’ll need approval from the state Department of
Revenue, and the strategy comes with risks. For example, if
you do an installment sale of a small business and the
business goes bankrupt soon after, there might not be any
profits left to receive in future years. Most people selling
their businesses opt for a lump-sum payout from the buyer.
Charitable deductions to offset income is also another
strategy, such as setting up a Donor Advised Fund the year
you expect a significant windfall.
“Even the most creative accountants still have to follow the
tax law,” said Shannon Ouellette, a financial planner with
Northwestern Mutual Financial Network, which has several
branches in the Boston market. “There are some
flexibilities, but it’s not like, ‘Here’s the magic wand and
everyone’s problems are solved.’ "
Q. Will more wealthy people move out of Massachusetts to
states like Florida and New Hampshire that do not tax
regular income?
“I hate advising people to do it,” said Jeffrey Levine, a
partner at Newton accounting firm Alkon & Levine. “I just
feel badly that they feel forced to lose some of the Boston
culture ... but more important, I feel terrible that the
state loses their revenue.”
Many accountants would advise someone to pack and move to
reduce tax liability. A September poll by the Massachusetts
Society of CPAs of its members indicated that 47 percent
would be more likely to recommend that clients move out of
the state if Question 1 passes.
A study by Tufts University’s Center for State Policy
Analysis estimates that the amount of revenue collected from
Question 1 could be reduced by as much as 35 percent between
tax avoidance strategies and millionaires moving.
That’s worrisome to Levine. “When people leave, that puts
more pressure on those who are staying to pay what’s
needed,” he said.
Q. Massachusetts has one of the most expensive housing
markets in the country, and it’s not uncommon to have a
substantial gain when selling a home. Should I be worried?
A. If Question 1 passes, the first $1 million continues to
be taxed at the five percent income tax rate that everyone
pays. It’s the next $1 million or more, that is taxed at
nine percent.
Let’s say you bought your primary residence in 1992 for
$550,000. You and your spouse sell the house today for $3.5
million. As a couple, you get a $500,000 tax exemption, and
after paying brokerage and other fees, your net profit on
the sale is $2.6 million.
This same household also draws another $100,000 in income,
perhaps through a salary or investments. That brings its
total income to $2.7 million. The state tax bill today would
be $135,000 compared with $203,000, if Question 1 passes.
In 2021, only two percent of Massachusetts home sales
resulted in a gain of more than $1 million, according to
analysis by the Massachusetts Budget Policy & Center.
Still, some voters might get spooked because real estate —
whether it’s your primary residence, vacation home, or
rental property — can be a significant source of wealth that
would now be subject to a new tax.
Q. Why can’t there be a carve-out for one-time millionaires?
A. Senator Jason Lewis, who co-sponsored the legislation
that put Question 1 on the ballot, said it’s unclear whether
lawmakers can tweak the measure like they have with other
ballot initiatives. That’s because it would mean amending
the state constitution.
“It would probably go to the courts,” said the Winchester
Democrat.
But if you’re asking this question, Lewis thinks you’re
missing the point. He believes the public sector is woefully
underfunded, especially in education and transportation, and
the new tax would allow the state to pay for programs and
services citizens deserve such as a world-class transit
system.
Even one-time millionaires, he added, can afford to pay a
little more.
“It’s not asking them to pay higher taxes every year,” Lewis
said.
Q. Isn’t this ballot measure a back door to the state
implementing a graduated income tax?
A. Most states have what is known as a graduated or
progressive income tax: The more you earn, the more you pay
in taxes. Massachusetts has a flat tax rate, which means
everyone pays the same rate.
“I wish we could have a graduated income tax in Mass. That
would be better tax policy,” said Lewis. “This is not a back
door. This is not a cracked door. The door is still
dead-bolted shut on a graduated tax.”
That’s because changing the income tax structure would
require an amendment to the state constitution, which would
require a lengthy and complicated process. Question 1
represents such a change, and it has been nearly a decade in
the making.
Q. The state budget has a record surplus, as well as
billions of dollars in federal relief money it has yet to
spend. Why does it need more money?
A. Surpluses come and go, and the federal pandemic money is
a one-time allocation. Question 1 allows for an annual
stream of money to boost spending in education and
transportation, such as expanding early education and
helping to pay for the rebuilding of the two Cape Cod
bridges.
”To have high-quality schools and world-class
infrastructure, we need to be able to invest every year,
year in and year out, not just have one year’s windfall,”
said Phineas Baxandall, senior policy analyst and advocacy
director at the Massachusetts Budget & Policy Center, which
supports Question 1.
My colleague Matt Stout reported last week that while the
ballot measure designates the revenue to go towards
education and transportation, there’s no guarantee that
lawmakers will actually increase spending in those areas.
Lewis, however, told the Globe that he will advocate for the
new tax money to “be additional dollars over and above
funding that is already provided.”
— Shirley Leung is a
Business columnist.
The Wall Street
Journal
Sunday, October 9, 2022
Opinion | Review & Outlook
Massachusetts Flirts With Tax Masochism
Democrats want a 9% top rate on income despite a revenue
surge.
By The Editorial Board
New Englanders have long held a slight edge on their New
York neighbors in fiscal sanity (if not always in baseball).
Now progressives in Boston want to join New York and other
nearby states in a high-tax arms race. Massachusetts voters
have the choice to block a tax hike and preserve a revenue
model that works.
Bay State ballots in November will give voters the choice to
place a 4% surtax on incomes above $1 million, bringing the
top rate to 9% from 5%. The proposal would amend the state
constitution to remove its flat-tax mandate. Passing the
measure would rocket Massachusetts to seventh from 31st on
the list of states with the highest marginal income-tax
rates.
Democrats in the Legislature voted in June 2021 to place the
tax hike on this year’s ballot. Gov. Charlie Baker, a
Republican, laid out a case against the measure. “We have
hundreds of thousands of people who are looking for work,”
he said, referring to the state’s then-6% unemployment rate.
“I don’t think we should be raising taxes.”
Massachusetts now boasts a lower jobless rate at 3.6% than
New York and Connecticut, and lower taxes have helped the
state’s economy and fisc. A $2.3 billion revenue surplus
shows that the state is already taxing more than it needs.
This year’s tax haul was so big it triggered a largely
forgotten state law that caps revenue. Residents may soon
receive checks that refund a portion of last year’s taxes.
In other words, Democrats are vying to raise income taxes at
the same time they’re rolling in an embarrassment of riches.
State House Speaker Ronald Mariano has proposed ending the
revenue cap whether or not voters back the new tax.
Approving the tax would speed up a wealth exodus already
under way. The Pioneer Institute last year noted that
Massachusetts’ tax base has been eroding, and there’s no
surprise about where the escapees are going. The top two
destinations are Florida and New Hampshire, both of which
lack an income tax.
The plot to scrap Massachusetts’ flat tax comes as several
states race in the opposite direction. Arizona, Georgia,
Idaho, Iowa and Mississippi all recently adopted flat rates
on income. Lawmakers in these states are taking advantage of
revenue surpluses to lay a foundation for sustained growth.
Massachusetts residents have ever more flight options to
consider if the tax burden at home gets heavier.
One irony is that New England states, which are typically
Democratic when it comes to federal elections, sometimes
choose GOP governors to hold down state taxes. But Mr. Baker
isn’t running for re-election and Democrats are likely to
retake the governorship. The constitution’s flat rate
mandate is a crucial limit on the demands of interest groups
for ever-more spending. If tax rates rise and the revenue
cap goes away, spending will soar to snatch the new revenue
and soon the politicians will return to seek even higher
rates, as they always do.
Opponents of the proposed tax hike can take inspiration from
Illinois, where voters in 2020 preserved their state’s 5%
flat tax. To adapt a saying from a different state: If
fiscal sanity can make it there, it can make it anywhere.
The Boston
Herald
Sunday, October 9, 2022
Maura Healey supports Charlie Baker’s tax cuts, and also
millionaire’s tax hike
By Matthew Medsger
Attorney General Maura Healey seems to be of two minds when
it comes to taxes.
“Right now, as I travel the state, there is a real issue
with affordability,” she said Sunday. “It gets to the
quality of life and it gets to Massachusetts competitiveness
and we’ve got to be working really hard in this state to
drive down the cost of housing, of childcare. One way we’re
going to get there is through tax reform and relief that’s
comprehensive.”
Healey joined hosts Janet Wu and Ed Harding on WCVB’s
political talk show “On The Record,” where the Democratic
candidate for governor said that the state law requiring the
return of about $3 billion should be followed as written and
that tax cuts proposed by Gov. Charlie Baker in January
should still be considered by the Legislature.
“We need tax relief. I have long encouraged the Legislature
to act, both in terms of giving the nearly $3 billion in
surplus back to taxpayers, as they are required to by law,
and to pass tax reform,” she said. “Gov. Baker put forward a
really sensible package on tax reform.”
In January, Baker proposed tax relief for renters, low
income families, older residents, and changes to both the
estate and capital gains taxes, Healey reminded the hosts.
“That needs to happen,” she said. “Again I hope that we see
the Legislature move on that quickly.”
However, when it comes to taxing high-income residents,
Healey says she will be voting in favor of the Fair Share
Amendment, or ballot Question 1 in November.
That question will ask residents if the state’s constitution
should include an amendment requiring income over $1 million
to be taxed an additional 4% over the state’s flat income
tax rate and the money be spent on transportation and
education.
Proponents say it’s just the rich paying their fair share.
Healey seems to agree and has campaigned alongside Question
1 advocates.
“I’d vote yes,” she said. “This is a really targeted measure
that is going to affect less than 1% of the population here
in Massachusetts.”
Opponents of the measure say it will make the state less
competitive.
“If passed, Question 1 would be one of the state’s
highest-ever tax increases at a time when our state already
has the biggest budget surplus in its history,” said Dan
Cence, spokesperson for the Coalition to Stop the Tax Hike
Amendment.
“The deceptive wording of the question leads voters into
believing that this is uniquely a tax on individuals earning
a million or more dollars annually, but in reality, the Tax
Hike Amendment would nearly double the income tax rate on
tens of thousands of small business owners, homeowners,
family farmers, retirees, and other Massachusetts
residents,” he said.
The ballot question, along with Healey’s job application,
will be decided by voters on Nov. 8.
State House News
Service
Wednesday, October 13, 2022
Income Surtax Supporter, Opponent Square Off
Farnitano, McAnneny Debate Constitutional Amendment Impacts
By Colin A. Young
With less than a month left for voters to decide where they
will come down on the Constitutional amendment that would
add a 4 percent surtax on annual household income above $1
million, each side of the argument made its case before the
Charles River Chamber on Wednesday.
The question has been years in the making and by Nov. 8
voters will have to decide whether to shift Massachusetts
away from the flat income tax rate structure enshrined in
the Massachusetts Constitution to allow for the surtax that
is designed to raise money for transportation and education
spending. If the amendment is approved, the first $1 million
of household income would still be taxed at the current 5
percent tax rate and household income above that first $1
million would be taxed at an effective rate of 9 percent.
It would add an estimated $1.3 billion in annual revenue for
the state, according to a report published this year by the
Center for State Policy Analysis at Tufts University.
Andrew Farnitano, communications director for Fair Share
Massachusetts, used his pro-surtax argument Wednesday to
emphasize the small number of very wealthy taxpayers who
would be imposed upon to pay more in taxes and how that
revenue would benefit the state more broadly.
"Regardless of what group we're talking about -- business
owners or home sellers or all taxpayers -- this tax is about
asking those at the very top, the top one or two percent of
those groups, to pay a little bit more, just an extra 4
percent on their second million, to make these really
important investments that we need to make in transportation
and public education, not just next year, but 10, 20, 30
years from now to have the sustainable revenue we need to
make those investments," he said.
Arguing against the surtax proposal Wednesday was Eileen
McAnneny, the president of the Massachusetts Taxpayers
Foundation, who made the case that adding a new tax burden
on wealthy residents is only going to harm the state's
economic competitiveness and will drive high earners to
lower tax states.
"I think it's unnecessary at this time," she said.
"Massachusetts has so much surplus tax revenue, we'll be
giving $3 billion of it back to taxpayers. I also think that
this will make Massachusetts less competitive than it is.
And again, our economy is based on innovation,
entrepreneurship, a highly-talented workforce, and I'm just
concerned given the options they have in this post-pandemic
environment that they'll choose to live elsewhere."
To back up his argument that the surtax would only affect
people who can afford to pay more, Farnitano pointed to
Department of Revenue numbers that show the surtax would
apply to 24,000 households or 0.7 percent of taxpayers. And
while the threshold would initially be set at $1 million (it
would be adjusted based on inflation), Farnitano said that
70 percent of surtax revenue would come from people who make
more than $5 million a year.
The surtax would not apply to businesses, but it could come
into play for sole proprietorships or pass-through entities
that pay personal income tax rather than corporate taxes.
Farnitano said less than 3 percent of Massachusetts business
owners have taxable personal income over $1 million that
would be subject to the surtax. And when it comes to home
sales, Farnitano said that there were 895 home sales last
year (less than 1 percent) that would have been subject to
the surtax because the gain in value minus deductions
exceeded $1 million.
"So only a tiny percentage of home sellers would see their
taxable income rise above $1 million, which is what matters
to Question 1," he said. "And let's be frank, people who are
making over a million dollars in profit from the sale of a
home can afford to pay a little bit more on that second or
third or fourth million to improve our public schools and
fix our roads and bridges, which have a much more important
impact on property values than a small change in taxes."
A big part of McAnneny's pitch Wednesday was that it is not
prudent to embed tax policy into the state's Constitution
because making any changes to address unintended (or
unpopular) consequences would require a complicated
four-year process similar to the one that was required to
get the question on this November's ballot.
"To me, that's very problematic, because ... at a minimum,
it takes four years to change it, should change be
necessary. And all I would say is, I would point to how
different our economy looks today than it did before the
pandemic, just three short years ago," McAnneny said. "And
so this essentially does not allow the Legislature the
authority to make any changes should they become necessary,
and in the Mass Taxpayers [Foundation] view, they will
become necessary."
McAnneny also zeroed in on what Charles River Chamber
President Greg Reibman called "the one issue that's going to
most confuse voters:" whether the money raised by the surtax
is actually guaranteed to be spent on education and
transportation. She said it guarantees that more money would
flow into the state's coffers, but not necessarily that more
is spent in those areas.
"Even if every dime from this surtax goes to education and
transportation as the proponents intend, it doesn't mean
that the Legislature has to continue spending what they
currently appropriate on education and transportation," she
said. "As you all know, money is fungible. So the money from
this can be guaranteed for education and transportation, but
it's not additive."
The text of the amendment calls for the revenue to go
towards transportation and education, but the Legislature
retains the ultimate decision-making power over state
spending and in a nearly $53 billion annual budget
theoretically could use money that the surtax brings in to
supplant existing state funding for transportation and
education.
Farnitano pointed out that if the Legislature "wanted to do
that they could do that today, this question doesn't change
the ability of the Legislature to spend existing revenues as
they want." But he also said he thinks the debate around net
new education and transportation spending is "a
distraction."
"Every single legislator in the leadership of the both
chambers, the likely next governor of the state, agree that
we need more funding for education and transportation. They
have a laundry list of projects because of the years of
disinvestment that we've seen in the state. I don't think
there's any question that their top priority in the next
year's budget, if this amendment passes, we'll be increasing
funding to our schools, increasing funding to the T and our
roads and bridges," he said. "It's just not reasonable to
expect that they're going to spend it on anything else or
even try to."
The debate hosted by the Charles River Chamber was not the
only surtax-centered event happening Wednesday. At roughly
the same time, another surtax debate was going on at Salem
State University between Max Page, president of the
Massachusetts Teachers Association, and Dan Cence, spokesman
for the Coalition to Stop the Tax Hike Amendment. That event
was hosted by the Frederick E. Berry Institute of Politics.
The Boston
Globe
Thursday, October 14, 2022
Millionaires tax debate pivots on who, exactly, would end up
paying new levy
By Matt Stout
A November ballot proposal that would raise taxes on the
state’s wealthiest has turned, to a degree, on a seemingly
contradictory query: Would the very richest among us
actually be the ones shouldering the new costs?
The question reared its head Friday during a debate over
Question 1, a proposed constitutional amendment that would
impose a 4 percent surtax on annual income over $1 million.
At the dispute’s center is the prospect of many so-called
one-time millionaires — the small-business owner or retiree
finally selling their company or home — suddenly eating a
higher tax bill, all because of a measure being touted as a
way to make our tax system fairer.
How many taxpayers would fall into that category can’t be
known, and data vary wildly.
Dan Cence, a spokesman for the business-backed committee
opposing the question, argued Friday that half of those
paying the tax each year could fall into that category —
“50.5 percent” he said, composed of people who “don’t
consider themselves millionaires.”
“Is that who we’re going after with this? I thought we were
going after the uber-wealthy?” Cence said during the debate,
hosted by WBUR in partnership with WCVB Channel 5 and The
Boston Globe. “This is people who’ve worked their entire
life for one single event that would fund their nest egg,
fund their retirement.”
The number, which is cited in a January report produced by
Tufts University’s Center for State Policy Analysis, stems
from a separate 2010 report produced by the Tax Foundation,
a pro-business think tank, and covers from 1999 to 2007.
It’s also a period that touches two recessions, argued
Andrew Farnitano, a spokesman for the labor-backed Fair
Share committee pushing the ballot question.
“That number is out of date. It’s not based in reality,” he
said during Friday’s debate.
More “recent research,” he argued, shows 15 percent of
taxpayers qualify as one-time millionaires. Those figures
come from a 2016 report whose authors include Cristobal
Young, a Cornell University professor.
Still, those numbers cover a similar, albeit longer, period
of time: 1999 to 2011.
Farnitano also made another argument: For those people who
breach $1 million on a one-time basis but do so only
slightly (say, reporting $1.1 million) their tax bill will
go up by several thousand dollars but comparatively,
“they’re only paying a tiny bit more.”
The vast majority of the revenue raised, he said, will come
from those reporting more than $2 million in income. “Those
are the super rich who will pay the most,” he said.
The back-and-forth encapsulated a running dialogue, and a
specific question posed by host Tiziana Dearing, of what
exactly constitutes as fair.
The question, if approved by voters on Nov. 8, would amend
the state Constitution to create a 9 percent income tax rate
on annual earnings above $1 million, while retaining the
broad 5 percent rate for earnings below that amount.
The measure mandates all new revenue from this tax —
estimated by state officials and proponents to be anywhere
from $1.2 billion to $2 billion annually — would be
earmarked for education or transportation, albeit subject to
appropriation, or legislative decision-making.
That means the Legislature will ultimately decide where the
money flows, be it to road projects, the MBTA, or local
school funding within the amendment’s broad confines. The
wording, critics argue, also leaves no guarantee spending on
education or transportation would actually increase because
lawmakers could simply shift other, existing revenue
elsewhere.
“This amendment is fatally flawed,” Cence said at another
point Friday. “It captures too many people in the middle
class. It’s going to keep doing so for generations because
it’s a constitutional amendment.”
Farnitano, citing the Tufts analysis, rejected that: In
2019, just 0.6 percent of households in Massachusetts
reported incomes of more than $1 million, according to the
report.
“Less than seven in every thousand people in our state,” he
said, “who have been the most successful, made the most
money, benefited the most from our economy, should pay a
little bit more.”
Other Ballot
Questions
CommonWealth Magazine
Wednesday, September 28, 2022
Some ballot questions could draw blank stares
By Michael Jonas, CommonWealth executive editor
Along with electing candidates to statewide and local
offices, voters will be asked to decide four ballot
questions in November. Two of them – whether to raise income
tax rates on high earners and whether to repeal a law
allowing undocumented immigrants to obtain driver’s licenses
– are fairly clear-cut, even if the arguments of those on
competing sides on the questions are not. The other two
questions, however, are anything but straightforward.
Question 2 would remake state regulation of dental
insurers, requiring that they devote at least 83 percent of
premium dollars they collect to payments for dental
services. Question 3 would rejigger state law regulating
retail alcohol licenses, doubling the number of licenses –
all-alcohol as well as beer and wine – a retailer could hold
from 9 to 18, but also capping the number of all-alcohol
licenses a retailer could hold at 7 – unless they already
hold more than 7.
These two questions follow in a long, if not necessarily
glorious, tradition of arcane issues being put to voters to
decide.
Four years ago, voters were asked whether the state should
set minimum nurse-to-patient staffing ratios for various
health care settings. The ballot campaign saw millions of
dollars spent by the two sides, which relied largely on
30-second ads to persuade voters on a very complicated
health care question that involved detailed issues of
hospital staffing practices, health care costs, and patient
safety.
While some ballot questions are easy to understand and form
an opinion on, many are not, said Rachael Cobb, a political
science professor at Suffolk University. “It’s a lot to put
on people to have to do the research, because these are not
straightforward,” she said. “There’s a good reason that we
have a representative democracy where we give power to
representatives to gain knowledge on topics. There’s a high
information cost for citizens to make complicated decisions
that are going to have wide ranging ramifications on
insurance structures or commerce in the state,” she said of
the November questions on dental care and alcohol licensing.
Cobb said the voter information guide produced by the
secretary of state’s office and the summary that appears on
the ballot may try to help voters, but they often don’t make
things any clearer. The summaries from the competing sides
on Question 2 that voters will see on their ballot are a
case in point.
“Insurance companies will try to confuse voters by saying
that dental insurance premiums will increase. This is false,
because Section 2(d) of the law specifically disallows
increases above the consumer price index without state
approval,” reads the summary from the “yes” side, which is
backed by dentists.
“This question will increase costs for Massachusetts
families and employers — a 38%-premium-increase in one
recent independent study — and could result in thousands of
people losing access to dental care,” reads the summary from
the “no” side, backed by insurers.
Question 3: On the alcohol license measure, Jon
Hurst, president of the Retailers Association of
Massachusetts, said his organization’s board voted in May to
oppose the question but the group is not taking any active
role in the campaign because it has members on both sides of
the issue.
“I don’t think people really understand it,” Hurst said of
the public’s knowledge of the issue. “Is this going to help
me? The voter isn’t going to understand which is better for
them.”
Hurst said the impact either way may be small, since lots of
licensing decisions are controlled at the municipal level.
While the measure would double the total number of licenses
a retailer could hold, it was put forward by the package
liquor store industry as a compromise against a competing
measure they feared would be pushed by convenience stores
and other retailers to lift the cap entirely on how many
beer and wine licenses a company could hold. Hurst said his
group opposed the ballot question because they generally
favor “more consumer choice, less government regulation.”
He said at one point it was expected that there would be an
attempt to broker a compromise between the two sides in the
Legislature. ”Everyone would get around the table with the
Tackey Chans of the world,” he said, referring to the House
co-chair of the Joint Committee on Consumer Protection and
Professional Licensure.
But Cumberland Farms, which has for years pushed for no
limits on the number of beer and wine licenses a company can
hold, did not pursue a competing ballot question, leaving
the measure backed by package store owners to go forward
alone to the ballot. Along with its changes to license caps,
Question 3 would change the way fines are levied for
violating alcohol laws from a percentage of alcohol sales to
a percentage of all store sales. That change would hit
hardest at package stores’ competitors – supermarkets or
places like Costco or BJ’s, which sell everything from beer
to computers.
Hurst calls the add-on “mean-spirited and unnecessary,” but
said it looked like the sort of thing that was intended to
serve as “trade bait,” something inserted in a proposal that
could be negotiated away as part of a compromise deal struck
in the Legislature. But that never happened, so it’s now
just one more element of the question voters will have to
decide on.
The legislative process may be better suited to deal with
complex issues, but the ballot question process serves as a
safety value, allowing things to come to a vote when
lawmakers refuse to touch a controversial topic.
“When it comes to democracy, is it possible to have too much
of a good thing?” asked former state representative John
McDonough in a deep-dive look two decades ago in
CommonWealth at the state’s referendum process.
It’s a nuanced and thoughtful examination of the issue, and
holds up pretty well today. McDonough’s conclusion: “Voter
initiatives may not be the best way to craft public policy,
but they’re not the worst, either. In Massachusetts, the
initiative process has, on balance, done more good than
harm. It’s given citizens a voice on important
controversies, and it’s compelled action when the
Legislature preferred not to take any, especially on matters
affecting legislators’ own behavior.”
Question 4
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Citizens for Limited Taxation ▪
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