By Artemis Huang
Boston University Statehouse Program
Proponents say Massachusetts Ballot Question 1 is a “no-brainer” for sustainable quality public education. But opponents suggest the impact on retirees and high-earners could blunt any potential benefits.
Question 1 would amend the state Constitution to create an additional 4% tax for annual incomes that exceed $1 million. Massachusetts currently has a flat tax rate of 5% for all income levels. Voters in the past have rejected several attempts to enforce a graduated income tax system.
Andrew Farnitano, a communications director for Fair Share Massachusetts, said the state needs more funding to support public education initiatives, including new hires, school buildings, vocational education and more affordable higher education.
“To create a long-term, sustainable source of funding for public education, we need to ask those at the very top – the people who earn over $1 million a year, who have been the greatest beneficiaries of our economy – to contribute a little bit more back to the next generation and support the needs of our schools,” Farnitano said.
Gayle Carvalho, president of the Quincy Education Association, said many local schools lack the resources to operate effectively and provide quality education as needs increase.
“Quincy is a city that is growing. We’re up to almost 10,000 students in public schools,” Carvalho said. “But we’re still retrofitting space in buildings. Supply closets are now becoming small classrooms.”
Carvalho worked as a full-time English teacher at Quincy High School for 11 years before taking her current position last summer. She said the teacher shortage also puts an increasing burden on the state’s already-few educators.
“In the 2020-2021 school year, I had, at one point, almost 130 students in five classroom sections,” she said.
According to Carvalho, fewer teachers caring for increasing needs from students and their families places a big emotional and mental toll on educators.
“My hope is that the extra funding would equate to better buildings, more staff, and smaller class sizes and course loads,” she said.
Liz Speakman, South Shore organizer for Fair Share Massachusetts, said funding is needed for schools to provide additional support to address special needs for local communities.
“In Quincy, we have a pretty high proportion of English language learners,” said the Quincy mother of two. “I think that we can have some additional support for those who need a little bit more attention or specialized support to make sure that they don’t get left behind.”
Speakman also expressed concerns over the lack of mental health support in public school systems.
“I’m a social worker, I know a lot of people in the community, and I spent five months trying to find my child therapists in 2019,” she said. “Even before the pandemic, it was really challenging to get pediatric mental health support. Now it’s almost impossible.”
Speakman hopes additional resources generated from the proposed surtax can be dedicated to building mental health systems in public schools.
“If the staff in the schools are referring out, there’s not really anywhere for the kids to access mental health support. And families are left with nothing,” she said.
Under Question 1’s proposed surtax, if a person has an annual income of $1.5 million, they will be taxed an additional 4% for the $500,000 that exceeds their first million in earnings, on top of a fixed 5% tax for their total income of $1.5 million.
Revenues collected from the tax increase would be used to fund public education and transportation, subject to appropriation by the Legislature.
Voting “yes” means supporting the amendment. Voting “no” would maintain the current flat tax rate for all income levels.
The state’s Executive Office of Administration and Finance predicts the proposal would generate $1.2 billion in the near term, which is around 2.4% of the current annual state budget. The left-leaning Massachusetts Budget and Policy Center says the change would bring in around $2 billion in additional tax revenue each year.
The Tufts University Center for State Policy Analysis estimates that the surtax would apply to around 0.6% of Massachusetts households in any given year and would raise about $1.3 billion of revenue in 2023.
Some worry that while more revenue might benefit the state’s public education system, the amendment might have adverse impacts on other sectors of society.
Christopher Carlozzi, state director for the National Federation of Independent Business in Massachusetts, said the surtax will “eat into the retirement nest egg” for small business owners who have devoted their lives to the community.
“They’ve invested a lifetime in Massachusetts. They’ve hired our friends and neighbors, they’ve done little league sponsorships and school sponsorships,” Carlozzi said. “When they’re going to retire, it’s really insulting to them at the end to say, ‘You can afford to pay more in taxes when you sell that business, and I know you’re planning to retire on that money, but you know, we need it for this tax instead.’”
According to The Boston Herald, The surtax would apply to up to 13,430 pass-through entities in Massachusetts, which are often small businesses filing revenues under personal income tax. Pass-through employers accounted for 57.1% of the state’s private sector workforce in 2018.
Tufts research reveals half of all million-dollar earners between 1999 and 2007 were one-timers, such as dentists who sell their practices, business owners bought out by their partners or individuals selling a valuable investment they’ve held for decades.
“They’re not targeting the rich here, unfortunately,” Carlozzi said.
Evan Horowitz, the executive director of the Tufts center, said while many millionaires might be experiencing one-time events, a major part of the money collected from the amendment would still come from consistent, extremely high earners.
Horowitz said one-time millionaires tend to be closer to the million-dollar threshold that is exempt from the surcharge. They also have the option to go to a tax lawyer and structure sales in a way to minimize their tax obligations.
“There are creative ways to do this,” Horowitz said.
Charles Chieppo, a senior fellow at Pioneer Institute, also questioned the timing of proposing the tax increase, saying that Massachusetts doesn’t need extra revenue when the state is receiving federal funds and has collected so much revenue that it triggered the 62F taxpayer refund.
“I’ve been in Massachusetts for 40 years, and we have never, ever been swimming in money like we are today,” he said.
Rep. James O’Day, D-West Boylston, said he “can’t deny” the fact that there is excess revenue in the state now, but he also pointed out that federal resources are not sustainable.
“Once that’s gone, that’s not coming around again next year, the year after and the year after that,” said O’Day, a lead sponsor of the proposed amendment.
In 2019, the Legislature passed the Student Opportunity Act, which provides an additional $1.4 billion for Chapter 70 local schools over seven years, a $90 million increase in annual special education funding and an annual $10 million for an educational innovation fund.
O’Day added the act was not implemented fully because it did not have sufficient funding.
“The first year we needed to fully fund it. We couldn’t,” he said. “That was a bitter pill to swallow.”
According to recent Tufts research, spending on earmark areas would increase by 30 to 70 cents for every dollar raised by the surtax, with the remainder diverted to other priorities of the budget.
Phineas Baxandall, senior analyst at Massachusetts Budget and Policy Center, said there currently are no estimates around the state’s financial needs for school buildings, staff shortages or education equality. But it is apparent that the needs in education are far greater than the center’s $2 billion tax amendment revenue estimate.
“But the bottom line is it will make a very significant difference,” he said.
Some worry high earning residents might leave the commonwealth if the amendment passes.
Chieppo pointed out that Massachusetts is already seeing increasing outflow to states with little or no income taxes, such as Florida and New Hampshire.
“You’d essentially see exactly what we saw in Connecticut, the overall slowing in the economy,” he said.
The Tufts research shows that cross-border moves and tax avoidance would reduce millionaires’ tax revenue by roughly 35%. Moreover, Horowitz noted that there might be a higher number of people leaving the state because the study is based on similar tax changes before the COVID pandemic.
“One thing that I worry about is that many more people will move out of the state than we expected,” Horowitz said. “Remote work has exploded obviously in the last few years … and studies we rely on for our estimates are no longer accurate.”
With the general election just weeks away, O’Day stressed the historic potential of the amendment.
“I think this is a century-improving bill,” O’Day said. “This particular bill, should it pass, when it passes, is going to make an incredible difference for the next 100 years in how we educate our kids.”