Tom DeSimone

This November, Massachusetts voters will deliberate on a proposed amendment to the state Constitution that would drastically change income tax structure in the commonwealth. If passed, it 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.  

The politicians who put the tax hike amendment on the ballot claim that it will raise taxes only on Massachusetts’ highest earners; in reality, Question 1 would nearly double the income tax rate on thousands of homeowners, small-business owners, family farmers and retirees, while punishing the Massachusetts real estate industry. We are urging voters across the state to learn the facts and vote “no” on Question 1.  

At its core, Question 1 is deceptive. Its wording leads voters into believing that this is uniquely a tax on individuals earning a million or more dollars annually. Proponents also falsely claim that the revenue generated from this tax will increase spending on education and transportation. Make no mistake: This tax will affect tens of thousands of hardworking Massachusetts residents, and the revenue from this tax will give politicians a blank check with zero accountability.  

Brian Kavoogian

1 in 5 Home-Sellers Hit 

If Question 1 were to pass, it will negatively impact the nest eggs of many small-business owners and longtime homeowners whose retirement depends on their investments. Unlike federal taxes on personal income, this measure treats one-time gains – such as those from selling a business or home – as regular income. This massive oversight will hit the entire real estate industry particularly hard. Through Aug. 31 this year, 1 in 6 homes in Massachusetts sold for over $1 million dollars. Question 1 also taxes all income received from real estate transactions, including those from rental properties, as well as from property management, construction and development and the commissions of Realtors and mortgage brokers.  

Reports have found that over half of the individuals who will be affected by this massive tax increase each year will only be affected one time in their life. These are not your typical “millionaires” or even “high-earners.” They are hardworking, middle-class people – many of whom are seniors – who will be taxed nearly double on income they were relying on to fund their retirement. 

Additionally, Question 1 will intensify migration out of the state – large businesses and high earners will sell property and move jobs to states with more favorable tax climates. We’ve already seen this across the Northeast. When Connecticut increased its income tax rate, large employers like GE left the state for Massachusetts. Already, Massachusetts loses more people than are moving in. Between 1993 and 2018, Massachusetts experienced an annual net loss of personal income of nearly $1 billion, 70 percent of it going to low-tax Florida and New Hampshire. 

In the meantime, small business owners and retirees will suffer under the new tax system – all to add to a nearly $2 billion budget surplus that is already being given back to taxpayers. In fiscal year 2021, the commonwealth’s surplus exceeded $10 billion, including collections from residents, workers, and businesses and unspent federal funding for COVID-19 relief. 

A Kick to Business When It’s Down 

In the wake of the pandemic’s economic downturn, we must create a supportive environment for businesses to recover. Massachusetts is already the second-most expensive state in the country in which to do business. If this amendment is passed, businesses will relocate facilities elsewhere at a time when hybrid and remote work is already transforming the office sector.  

Our current tax code already creates a high economic barrier to entry – any additional increases will make the process of opening new business or even maintaining current in-state assets even more difficult. Question 1 also threatens the viability of small businesses, especially pass-through S-corporations. These small businesses file their business’ revenue as personal income, even though much of it is reinvested back into their business. 

Proponents of this massive tax increase continue to deceive voters by asserting that all revenue generated from the tax hike will go towards education and transportation spending. In reality, the state legislature can redirect funds that previously went towards these priorities to any number of projects. While politicians will be giving themselves a blank check, the tax hike amendment will irrevocably damage our economy.  

This truth was reinforced by a report from the nonpartisan Tufts Center for State Policy Analysis states, “For every dollar raised by the surtax, spending on these earmarks is likely to increase by 30 cents to 70 cents, with the remainder effectively diverted to other areas of the budget…The problem is fungibility, or the ease with which lawmakers can shift money between programs.”  

The amendment proposed by Question 1 would, if passed, severely impact not just the real estate industry, but tens of thousands of hardworking residents. It makes little sense to punish homeowners and a real estate industry in a moment of recovery – even less so when the commonwealth possesses a historic surplus. We have joined the Coalition to Stop the Tax Hike Amendment because we know that Question 1 will severely impact our economy and the future of business in Massachusetts. We urge you to vote no on Nov. 6. 

Tom DeSimone is a partner at WS Development and Brian Kavoogian is a managing partner at National Development. Both are members of the No on Question 1 campaign. 

Question 1 Is Unfair, and Won’t Work

by Banker & Tradesman time to read: 4 min