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With business groups unable to keep a proposed surtax on incomes over $1 million off the 2022 ballot, opponents of the so-called millionaires tax are promising a strong electoral challenge.

“The voters should not forget or forgive this level of greed and they will have another chance to hold them accountable in 2022,” Paul Craney, a spokesman for the Massachusetts Fiscal Alliance said.

The House and Senate, meeting jointly, voted 159-41 Wednesday to let voters decide on the 2022 statewide ballot whether to move away from the state’s flat income tax structure. If the surtax is approved by voters, the first $1 million of household income would still be taxed at the 5 percent rate and all household income above and beyond that first $1 million would be taxed at an effective rate of 9 percent. The Department of Revenue has estimated it would generate about $1.9 billion in revenue annually, which proponents say will go to education and transportation funding.

The Massachusetts chapter of the National Federation of Independent Business said it was disappointed that the Legislature advanced the graduated income tax proposal and warned that it will harm small businesses already hurting from the pandemic.

“The proposal’s supporters conveniently omitted that many small businesses who file as pass-through entities for tax purposes will be impacted by the higher tax rate,” NFIB State Director Christopher Carlozzi said. “Those business owners who spent a lifetime building their business, providing jobs, paying taxes, participating in their communities, will be penalized with a higher taxes when they sell their business to retire.”

During his floor remarks, leading surtax supporter Rep. Jim O’Day pre-emptively rejected similar claims from opponents by claiming that “businesses earning over a million dollars, in my estimation, are not small businesses.”

The West Boylston representative also shot down the argument that the passage of the surtax amendment would kick off a trend of wealthy residents and businesses packing up and moving out of Massachusetts.

“The fair share amendment has been a topic of discussion for at least eight years in one form or another,” he said. “If businesses and billionaires really wanted to leave – it’s not like we’re just pulling this out of a bag last night to talk about it, we’ve been talking about it ad nauseam – if they didn’t like it here, they would have left long before now.”

The November 2022 Ballot

The income surtax amendment could become something of a center of gravity for the 2022 election cycle in Massachusetts, especially in the race for governor.

Ben Downing, a former Democratic senator who is running for governor, said Wednesday he looks forward to working to pass the ballot question in 2022 and called it “a chance for us to begin to remedy the inequity that plagues our state and build a fairer, stronger Massachusetts for all 351 cities and towns.”

Gov. Charlie Baker has not said whether he intends to run for a third term in 2022 and he’s also not outlined a clear position on the income surtax. Baker’s office did not offer a response to Wednesday’s vote, but the Republican governor generally does not favor tax increases.

All of the state’s Constitutional offices and all 200 seats in the legislature will also be on the November 2022 ballot.

Surtax supporters were confident about going to the ballot in 2018, too, before the SJC derailed that campaign. Raise Up and the legislative sponsors said after Wednesday’s vote that they are confident the question will actually go to voters next year but acknowledged that the campaign will be long and bruising.

“We feel that we’re on really solid ground, but I’m sure the opponents of this are going to look under any rock, every rock, to try to find some kind of way from preventing themselves from having to pay their fair share,” O’Day told reporters in the hallway outside the House Chamber. “They are the ones, obviously, that will have the ability to throw a ton of cash at this issue and that’s probably how they’re going to try to beat it. They’d rather spend $100 million on defeating this than spend an extra $40,000 or $50,000 in taxes. It doesn’t make a great deal of sense to me if you want to be a good neighbor.”

Income Surtax, Take Two

The Democrat-controlled legislature twice endorsed the citizens petition for the 2018 ballot despite Republican opposition, voting 135-57 in 2016 and then 134-55 to advance it in June 2017.

But then the wheels fell off. Three major business groups – the Massachusetts High Technology Council, Mass. Taxpayers Foundation and Associated Industries of Massachusetts – filed suit, which worked its way up to the Massachusetts Supreme Judicial Court. The SJC tossed the question from the ballot in June 2018, ruling that it improperly mixed two different spending priorities and a major change in tax policy.

The state Constitution allows initiative petitions to contain only subjects that are “related” or “mutually dependent,” and the lawsuit argued that the proposed surtax improperly bundled unrelated subjects of a graduated income tax and spending on education and transportation.

Democrats have gotten around that rule this year by having legislators, who are not bound by the same restrictions, file the petition directly.

Aside from letting the income tax rate fall in small increments in recent years to 5 percent, the level voters approved in a 2000 ballot question, Beacon Hill has largely steered clear of changes to the state’s two big taxes – sales and income – since 2009, when the Legislature raised the sales tax rate from 5 percent to 6.25 percent.

Wednesday’s vote took place while Massachusetts is flush with cash. Legislative leaders and the governor are playing tug-of-war over control of about $5.2 billion in federal American Rescue Plan Act funding and the Department of Revenue is on pace to collect nearly $4 billion more in tax revenue than the Baker administration expected it would this fiscal year.


With Millionaires Tax on Ballot, Opponents Promise Fight

by State House News Service time to read: 4 min