BOSTON (SHNS) – About two weeks out from Election Day, a new ad from the coalition trying to convince voters to oppose a Constitutional amendment that would add a 4 percent surtax on annual household income above $1 million is causing a stir and, with ballots already being cast, supporters are trying to combat what they see as “misinformation.”

The ballot question has been years in the making and voters have until Nov. 8 to decide whether to shift the state 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 causes. 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.

While proponents have been pitching the surtax as a way to get the wealthiest residents to pay their “fair share” in taxes, a big part of the opposition campaign has involved highlighting the ways in which the surtax will also impact people who aren’t necessarily millionaires or billionaires, like small businesses structured as sole proprietorships or pass-through entities that pay personal income tax rather than corporate taxes.

In an ad that began airing over the weekend, the Coalition to Stop the Tax Hike Amendment calls attention to the fact that “Question 1 includes the sale of homes” and claims that “Question 1 would nearly double the income tax rate on tens of thousands of Massachusetts residents and retirees when they sell their home.”

The surtax does not change what is or is not taxed, but it would come into play with some home sales because of the way that Massachusetts already calculates the personal income that is subject to state taxes. When someone sells a home, the capital gain from that sale — essentially the difference between the sale price and the original purchase price minus sizeable deductions — is considered part of the seller’s income for that year.

Surtax supporters called a press conference Monday morning to slam the “egregious ad … and the lies that it is telling to Massachusetts voters” for being misleading and to call on TV stations that sold airtime for the ad to pull it from its airwaves. Fair Share Massachusetts said the ad’s claim that the surtax “would nearly double the income tax rate on tens of thousands of Massachusetts residents and retirees when they sell their home” wildly overstates its impact.

The pro-surtax group, pointing to a report from fellow surtax supporters at the Mass Budget and Policy Center that relied on housing data from The Warren Group, said there were 895 Massachusetts home sales in 2021 (less than 1 percent) that would have been subject to the surtax because the gain in value minus common deductions exceeded $1 million.

La-Brina Almeida, a policy analyst at MassBudget, detailed the deductions that are available to home sellers — married home sellers can deduct $500,000 from the sale price of their primary residence and single sellers can deduct $250,000 — and the other things that are not counted in the calculation of the capital gain from a home sale, like the value of major home improvements and closing costs.

“So for instance, if you bought a home for $300,000 and sold it for $1.5 million, the initial profit would be $1.2 million. And once you use the exemption for $500,000 because it’s your primary residence, $150,000 for all of the improvements you made from the home over the years, and $75,000 in closing costs, the amount subject to income tax would only be $475,000, which is nowhere near the million dollar threshold that would be affected by Question 1,” she said.

The surtax opponents backed up their ad by noting that a home sale would represent only a portion of a person’s annual taxable income, meaning that the capital gain on the sale would be combined with other income and could push the total taxable amount over the $1 million threshold.

“If Question 1 were to pass, it would immediately raise taxes on all taxable income in excess of $1 million by 80% — which includes both the sale of a home plus whatever the household is bringing in in annual income,” DJ Cence, a spokesman for the Coalition to Stop the Tax Hike Amendment, said. “Today, 1 in 5 homes are worth over $1 million in Massachusetts. Unlike federal taxes, Question 1 would treat one-time gains from selling a home as regular income, pushing many retirees into the new higher tax bracket, and nearly doubling their taxes.”

Cence said the coalition pulled data from the real estate website Zillow showing that 21 percent of Massachusetts homes on the market sold for $1 million or more.

“This, combined with other income from that year, would get thousands of individuals over the threshold for this tax,” he said.

Supporters at Fair Share Massachusetts acknowledged Monday that the even selling a home at a gain of less than $1 million could push some people above the $1 million income threshold but downplayed the number of such situations.

“If a homeowner has close to or over a million dollars in income aside from the sale of their home and they receive a small amount of capital gain from the sale of the home, and those two things together add up to over a million dollars, they would pay a little bit more on their second million,” Andrew Farnitano, communications director for Fair Share Massachusetts, said. “But the idea that there is any number of middle class homeowners who will be affected by this tax when they go to sell their home who are otherwise middle class taxpayers is just not true.”

Earlier this month, during a debate hosted by the Charles River Chamber, Farnitano addressed the surtax’s impact on home sales and argued that “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.”

That surtax supporters were quick to publicly call out the ad and urge TV stations to stop airing it shows the importance that they put on making sure voters know exactly what their proposal would and would not do.

A column from the Boston Globe’s Shirley Leung on Monday looked at the five unsuccessful efforts to move Massachusetts off of its flat income tax rate — in 1962, 1968, 1972, 1976 and 1994, all of which were resoundingly rejected by voters — and how this year’s attempt is different. Explaining those differences will be key for supporters if this year’s proposal is to break the trend.

“Fair Share amendment poses a really important question of public policy for the voters of Massachusetts to decide. That should be robustly debated, but what it shouldn’t be is lied about. People should be making their decision based on facts,” Peter Enrich, a law professor emeritus at Northeastern University Law and former counsel in Gov. Michael Dukakis’s budget office, said. He added, “What this really is, this is a Halloween ad that’s trying to scare people with imaginary ghosts. And that’s not the way we should be deciding questions of tax policy.”

Enrich was among those Monday who criticized the anti-surtax ad and specifically highlighted how the ad includes a footnote on the screen when the claim is made about affecting “tens of thousands” of residents when they sell their homes. That footnote points viewers to a January 2022 study from Tufts University that does not mention home sales.

“I went back and I looked at that study and not only does it not say that there are tens of thousands of people who would be affected because of selling their homes, it never mentions sales of homes at all. There’s nothing about that,” Enrich said. “It does say that last year 20,000 households would have been affected by the fair share amendment; that’s the 0.6 percent of households that have incomes over a million dollars. Nothing at all about the impact of selling a home or the income from selling the home or anything.”

Cence said Monday that the footnote in the ad “is for the claim made that it will increase taxes for tens of thousands of MA residents” and not specifically relative to home sales.

different report from the Center for State Policy Analysis at Tufts, published in September, found that “by 2083 [the surtax] would still hit only about 2 percent of households” but cautioned that home sales could eventually make even more residents subject to the surtax.

“To be sure, there are scenarios where the millionaires tax would affect many more families, particularly if the exclusion for capital gains on home sales isn’t increased,” the report said. “But this is not an issue likely to emerge suddenly or spread quickly, so lawmakers should have ample time to address it.”

Asked if Fair Share Massachusetts would advocate for the capital gains exclusion for home sales to be increased, Farnitano said Monday that the group is focusing solely on the next two weeks of work on the surtax question but noted that the surtax amendment would not tie the hands of future Legislatures.

“Question 1 doesn’t change how different assets are taxed, how different elements of income are assessed. It doesn’t make any changes to the underlying tax structure, it merely adds this additional 4 percent tax,” he said. “So 10, 20, 40 years in the future, the Legislature will still have the ability to increase exemptions or deductions if they deem it necessary.”