Wealth surtax advances to next session on 14-48 vote

Boston Statehouse

BOSTON (SHNS) – The Legislature voted overwhelmingly in favor on Wednesday of amending the state constitution to raise income taxes on the wealthy, a first step toward a new tax that supporters say could generate as much as $2 billion in new revenue to spend on transportation and education.

House and Senate members voted 147-48 in favor of an amendment (H 86) that would impose a 4 percent surtax on annual income greater than $1 million, well more than the 101 votes needed to advance.

While supporters said wealthier residents can afford to help the state invest more in infrastructure and public schools, opponents and business groups have warned that its passage could drive employers out of state.

Critics have also cast doubt on revenue estimates.

“We’re supposed to be world leaders. You don’t do that if you don’t have an educated workforce,” said Rep. James O’Day, the sponsor of the amendment. “You don’t do that if you can’t get your workforce to work on time because you’re sitting on the Mass Pike for two plus hours. Those things have to stop.”

The debate and vote took place almost a year to the day that the Supreme Judicial Court last summer struck down a citizen petition to implement the same new tax on the wealthy. This proposal will not face the same scrutiny because it’s been filed by a legislator.

The vote also occurred a day after another MBTA train derailment created havoc for commuters, this one affecting Red Line riders.

The so-called “millionaires tax” will need to be passed again at a Constitutional Convention in the 2021-2022 session in order to go before voters on the November 2022 ballot. The amendment is required because the state’s constitution currently mandates that a tax on income be applied evenly to all residents.

The House voted 112-43 and the Senate voted 35-6 to pass the amendment.

Eleven House Democrats joined all 32 House Republicans in opposing the amendment, including multiple lawmakers from the Springfield area.

Reps. Brian Ashe of Longmeadow, Ann-Margaret Ferrante of Gloucester, Michael Finn of West Springfield, William Galvin of Canton, Colleen Garry of Dracut, Danielle Gregoire of Marlborough, Christopher Markey of Dartmouth, Thomas Petrolati of Ludlow, Angelo Puppolo of Springfield, John Velis of Westfield and Jonathan Zlotnik of Gardner all voted no.

On the Senate side, Sen. Patrick O’Connor, a Weymouth Republican, was the only senator to cross party lines, casting his vote in favor of the income surtax while the other five Senate Republicans voted against it.

“Guess what? If you’re making more than a million dollars, you’re actually paying more taxes,” said Rep. Sheila Harrington, a Groton Republican and opponent of the millionaires tax. She said it would set a bad precedent to single out a single group of residents for higher taxes.

Lawmakers batted down a number of suggested changes to the proposal over the course of the debate, with leadership pressing to make sure the final proposal mirrored the one from last session that polled well among voters.

Sen. Jason Lewis, who also sponsored a version “Fair Share” amendment, said that wealthier residents have benefited disproportionately from the economic growth of the past decade and can afford to contribute more.

“We have tremendous unmet needs in Massachusetts that are hurting our families and our communities and our state’s economic future. Everybody knows what these are,” said Lewis, a Winchester Democrat.

Minority Leader Brad Jones, a North Reading Republican, tried to amend the proposal to guarantee that any money collected from the millionaires tax would be spent in addition to state funds already put toward education and transportation, not in lieu of those funds as part of a “bait and switch.”

“Part of the reason we need to do this is because our track record as legislators in respecting the will of the voters on tax matters is not particularly good,” Jones said, noting that the income tax rate has still not been lowered fully to 5 percent, as called for under a 2000 ballot law.

Sen. Adam Hinds said he appreciated the “intent” of the Jones amendment, but argued that the proposal should not be changed. The amendment failed on a 40-132 vote.

Similar arguments for keeping the proposal intact were made throughout the debate as several amendments were withdrawn and 13 recommended changes were rejected.

Before the debate even began, Rep. Alice Peisch, a Wellesley Democrat and the co-chair of the Education Committee, withdrew her proposal that would have opened the door for the Legislature to impose a fully graduated income tax with as many tax brackets as it wanted.

Peisch declined to comment in the hallway about her amendment and her decision to withdraw, but Sen. Jason Lewis, who co-sponsored the “Fair Share” amendment, said it was important to keep the proposal “simple and clear.”

“If we could have a graduated income tax structure, I think a lot of people would support that, but that has been put before the voters five times in the past,” Lewis said. “It’s been on the ballot and voters had concerns with that which is why I think it’s important we have clarity about exactly what we are doing and why the fair share amendment is the best proposal to put forward.”

A Sen. Ryan Fattman amendment to sunset the millionaires tax on Jan. 1, 2028 was also defeated.

Rep. Randy Hunt, a Sandwich Repubican and accountant, told his colleagues he thought it would be “unwise” to write a specific tax rate into the constitution and said California was the only other state to embed a tax rate in the constitution.

Hunt, however, but lost his bid to amend the proposal by giving the Legislature flexibility to set a surtax rate between zero and 4 percent, and to also trigger an income tax cut for individuals earning less than $100,000 if the millionaires tax were to take effect.

Using 2017 tax data, Hunt estimated the amendment would affect about 20,000 Massachusetts taxpayers, each of whom would face an average of $178,000 in additional taxes based on 2017 data — a high enough burden, he warned, to push residents out of state.

“For $178,000, people will find a way to avoid paying the tax by paying family members, deferring taxable income by using non-qualified retirement plans, sheltering income in irrevocable trusts, or, as has been mentioned, simply moving to New Hampshire,” Hunt said. “To think that people of means wouldn’t move 50 miles to avoid $178,000 of extra taxes, in my opinion, is naive.”

Before the debate started, a group from the Raise Up coalition gathered outside the House chamber to rally in support of advancing the proposal.

“We’re like junkyard dogs. We don’t give up,” said organizer Lew Finfer said, describing the amendment’s history and the Supreme Judicial Court decision last summer knocking it off the ballot on a “technicality.”

Earlier this week, Massachusetts High Technology Council President Chris Anderson told his membership at their annual meeting that, if passed, the amendment would lead businesses to uproot and move to states like Tennessee, Georgia or Florida where tax burdens are lower.

Christopher Carlozzi, state director of the National Federation of Independent Business, also said small business owners and their retirements were being put at risk.

“Unlike large corporations, most small businesses are organized so that the owner pays business taxes through their personal income tax return, which may subject them to the millionaire’s tax,” Carlozzi said.

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