Looking forward: The millionaire’s tax in a post-pandemic Mass.

"Dollar Bills" by 401(K) 2013 is licensed under CC BY-SA 2.0

By Isabel Contreras
Boston University Statehouse Program

BOSTON — As Massachusetts residents and legislators continue to acclimate to the new normal in the year since the pandemic started, some are turning their attention back to a hot topic that has been debated for years: the “millionaire’s tax.”

The proposal for a state constitutional amendment that would impose a 4% surtax on income exceeding $1 million, also known as the Fair Share Amendment and Proposition 80, passed through the Massachusetts House and Senate during the last legislative session and, if approved again, will be included on the November 2022 ballot.

In the time since the amendment first passed in 2019, the country has faced a transformative year, a year that legislators and business advocates say has challenged the state’s taxation needs and priorities.

State Sen. Adam Hinds, a Pittsfield Democrat who is Senate chairman of the Legislature’s Committee on Revenue as well as the Senate Committee on Reimagining Massachusetts Post-Pandemic Resiliency, voted in favor of the constitutional amendment in 2019.

Hinds said COVID-19 has highlighted the gaps in funding for the state’s education and transportation systems — the two areas that would receive the revenue collected through the proposed tax — which play an important role in reducing income and racial disparities in the state.

“I’m thinking particularly about the Student Opportunity Act, but also the serious vulnerabilities revealed by the pandemic point to child care and early education as a critical investment for the economy and for addressing income inequality and ensuring we have a robust recovery,” Hinds said. “Each of those are pointing at more revenue, not less.”

Andrew Farnitano, a spokesman for RaiseUp Massachusetts, a nonprofit coalition that supports what it calls the Fair Share Amendment, said the education and transportation sectors will need more funding to address the long-term effects of the pandemic.

“I think the need has multiplied, especially in our education system that’s seen so much disruption,” Farnitano said. “It’s going to take years to recover. The impact the pandemic has had on kids’ mental health and emotional health is going to take a lot of work to repair in addition to academics.”

But critics caution that taxing high-income earners could chase them out of the state, leaving Massachusetts without their already sizable taxes while depleting the state’s business and entrepreneurial sectors.

Paul Craney, board member and spokesman for the Massachusetts Fiscal Alliance, cited cases where similar taxes in states like Connecticut, Maryland, California and New Jersey have pushed rich residents away from the state, forfeiting their high revenue taxes.

“The first year there are some higher taxes collected, but the next year it falls off because all these people just move out of state,” Craney said. “Then, as a state, you just lost that ability to have their taxes. Once you chase out your high-income earners it’s really hard to bring them back.”

Greg Sullivan, research director for the Pioneer Institute, said the burden of this tax would eventually fall on local businesses and “one-time millionaires,” or people whose income surges over $1 million due to a good year for their business or some other factor.

“The proposal effectively represents a tax on small and medium-sized businesses in Massachusetts,” Sullivan said. “That’s really bad timing, as these businesses try to recover from the COVID recession.”

Craney said in spite of the economic toll COVID-19 has had on many, the state has collected more revenue than expected. The state is also receiving federal relief, implying that the Legislature does not need extra funding.

“What this [is] really all about is for politicians to always have a spigot of money coming in so they never have to reduce their spending,” Craney said.

Hinds said long-term investment is necessary to overcome the obstacles posed by the pandemic, and federal stimulus is not enough.

“They are one-time investments,” Hinds said. “The problems that have been revealed and the needs really require sustainable revenue. While there will be a large injection in the short term, identifying long-term sources of revenue for these critical investments is important as well.”

JD Chesloff, Executive Director for the Massachusetts Business Roundtable, said the state has to find a balance between making investments that are important to the local economy and making the state attractive in terms of costs of living and working.

“The pandemic changed that equation quite a bit,” Chesloff said. “Some employers are simply more mobile now; the pandemic has proven the concept that work can be done from anywhere. Some folks are saying that the barriers to exit have never been lower. It’s just easier to move.”

survey conducted by MassINC Polling Group in January showed that 72% of participants backed the surtax. Not only this, but they supported the measure on possible revenue direction towards education or transportation.

Earlier polling data also shows public support for the tax, despite the Massachusetts Supreme Judicial Court’s dismissal of a previous proposal for this constitutional amendment. The court cited a “relatedness clause,” a restriction specific to citizen proposals for constitutional amendments. This does not apply to amendments proposed by the Legislature.

Phineas Baxandall, a senior policy analyst with the Massachusetts Budget & Policy Center, said the surtax’s public support makes him confident it would not drive too many people away from the state.

“What draws people to live and work in Massachusetts is our great schools and being a great place to live and raise a family,” Baxandall said. “What will drive people away is a broken transportation system and unaffordable housing — not marginal changes in tax rates for multi-millionaires.”

This article was originally published in the Daily Hampshire Gazette.

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