A proposed millionaires’ tax amendment garnered a strong show of support at the State House last week, after amassing more than 157,000 petition signatures last fall to get it considered. The so-called Fair Share Amendment needed to secure 50 “yes” votes at Wednesday’s constitutional convention to advance; it received 135, with 57 legislators voting against.
The proposed amendment to Massachusetts’s constitution would raise the income tax rate on the state’s wealthiest residents, bringing the share of income they pay in overall state and local taxes more in line with that paid by other residents. That new revenue would be directed toward education and transportation infrastructure improvements across the commonwealth. The amendment specifies that the revenue support public education, affordable public higher education and the repair and maintenance of roads, bridges and public transportation.
“People hate taxes, we get it,” Sen. Karen Spilka said at the constitutional convention. “But people should also hate the idea that children may not be getting adequate education to be competing in a global economy. They should hate that their loved ones may spend hours of their lives commuting and going on unsafe bridges.”
With last week’s vote, the Fair Share amendment passed the second of three hurdles to reach the ballot in Nov. 2018. The final step: Once again secure 50 votes at next year’s constitutional convention.
If it makes it to the 2018 ballot and is passed by voters, the proposal would increase by 4 percent the tax rate paid on any income earned after the first $1 million. This income amount would be adjusted to keep pace with annual cost-of-living increases so that the tax continues to apply to only the top earners. In 2019, the new tax could generate approximately $1.6 to $1.7 billion in today’s dollars, according to information provided by Raise Up Massachusetts, the coalition behind the Fair Share campaign.
Who pays?
Massachusetts’ top earners pay lower state and local taxes (which includes sales, property, income and excise taxes) compared to lower-earning residents, according to the Institute on Taxation and Economics. In 2015, the top 1 percent of earners — who make more than $860,000 per year — paid 4.9 percent of their income in these taxes. Meanwhile, those making $44,000-$70,000 paid 9.3 percent of their income, and the lowest 20 percent, who earn less than $22,000, paid 10.4 percent.
If the millionaires’ tax is added, top earners would pay 8 percent, still a lower share than the average household, according to The Boston Globe. Under the amendment, approximately 0.5 percent of households — 20,000 residents — would pay the higher tax rate, according to the state Department of Revenue.
Social impact
Fair Share proponents gathered in a show of support at the State House before the convention. They say the benefits of a millionaires’ tax include repairing crumbling infrastructure, narrowing equity gaps through better education and reducing or ending student debt.
Raise Up Massachusetts literature suggests the revenue be used as well to fund reforms shown to reduce equity gaps, such as expanding access to extended learning time and early education.
Advocates also say it is a good time to invest in infrastructure. By the end of 2015, 415 of the state’s bridges were structurally deficient, a number expected to rise to 700 by 2025 if the level of state investment does not increase, according to information from Phineas Baxandall of the Massachusetts Budget and Policy Center. Similarly, if funding remains level, he predicted that by 2025, 79 percent of state roads will be in poor or fair condition — up from 37 percent today.
The amendment could even increase life expectancies, Rebekah Gewirtz, executive director of Massachusetts Public Health Association, said.
“That is a recipe for public health,” Gewirtz told the Banner. “All literature suggests that quality education and transport that can get people to jobs, to doctor’s appointments, help people live longer, healthier lives.”
Neighborhood and societal factors, such as the state of the sidewalks and the education opportunities available, play a significant role in people’s ability to make healthier choices, Gewirtz said. For instance, repairing broken sidewalks lets people be more mobile, and providing transit to grocery stores — along with the kind of education that leads to well-paying jobs — allows people to access healthier food.
In 2007, adults age 25 and up who did not have at least a high school degree were 4.5 times more likely to report their health as “fair” or “poor” and five times as likely to report serious psychological distress, according to a 2012 report from Virginia Commonwealth University’s Center on Human Needs. Diabetes was more than twice as prevalent among that group than among adults who had graduated high school.
The million-dollar question
Legislators opposing the amendment said it threatens to damage the economy by prompting millionaires to remove themselves or their assets from the state, and thus from the tax pool and local economy entirely.
During the convention, Senate Minority Leader Bruce Tarr called the proposed tax “a further penalty on success” that targeted those who are “among the most mobile … [and] have the ability, more than other people in our society, to avoid taxation [by leaving].” He added that he expected it to be an unpredictable revenue source, reliant on expectations about the living choices of these wealthy residents.
State Rep. Geoff Diehl said that wealthy investors and entrepreneurs are the primary job generators, and that this tax stands to discourage them from entering the state.
However, Jesse Mermell, president the Alliance for Business Leadership, a group that connects progressive business leaders and policymakers to work toward reforms, told the Banner that she believes the Fair Tax amendment will provide business with desirable assets desirable, such as an educated workforce and safe, reliable transportation.
“There is nothing more important that we can do for the economy and business environment in Massachusetts than investing in education and transport,” she told the Banner.
Raise Up Massachusetts members assert that tax rates are less likely to spur millionaires’ residency decisions than factors such as jobs and social circles.
“Research shows that high-income people move to be near family and jobs, or to places with cheaper housing markets or warmer weather, not to save a few percentage points on their taxes.” states a Raise Up Massachusetts facts sheet. The coalition predicts that those most likely to be leave due to the tax would be wealthy retired people, which could reduce the new revenue from approximately $1.7 billion to approximately $1.6 billion.
Better or just not worse?
Several Republican legislators said that there is no guarantee that the purpose of the amendment — increasing resources for education and transportation — will be achieved, as lawmakers are not obliged to keep budgeting these areas at their current level. Legislators could redirect some funding and replace it with the new tax revenue, thus maintaining, not raising spending.
“You can’t trust us,” Rep. Bradley Jones said. “[This will] perpetuate the myth to the commonwealth that we will respect your vote.”
He argued that the Legislature has shown it cannot be trusted because it has yet to bring income tax rates fully down to 5 percent, as per a vote made in 2000. The state’s income tax rate is currently 5.1 percent.
“Trying to convince voters of the commonwealth that because we need revenue, that we’ll actually spend that revenue on transit and education is a big exercise in ‘Trust me. Trust the legislators,’” Jones said.
Eyes on 2018
Lewis Fifner, director of Massachusetts Community Action Network, said that even with the amendment securing a strong majority of legislator votes at this year’s convention, there is much work still to be done.
And the potential impact, he said, is huge.
“There has never been a major progressive tax passed in Massachusetts. Ever. This is huge in terms of fairness,” and in terms of resources generated, he told the Banner.
