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By Michael T. Lahti
Whether a “Millionaire’s” tax should be imposed in Massachusetts is causing heated debate. As reported in Tax Notes, opposing sides of an initiative petition in Massachusetts to impose a millionaire's tax recently squared off as the proposal received its first legislative hearing by the Joint Committee on Revenue. At issue is a petition to amend the state's constitution to levy a 4 percent surtax on taxpayers with annual taxable income of more than $1 million. Massachusetts’ constitution requires an income tax to be levied "at a uniform rate . . . upon incomes derived from the same class of property," thus it would have to be amended. To amend the constitution to allow for the surtax, legislative approval from at least 25 percent of lawmakers in two successive legislative sessions would be required, and then have voters would have to approve it at the ballot.
"The richest among us have enjoyed vast consolidation of wealth over the last quarter century, making Massachusetts the state with the eighth-highest income inequality," Rev. Jane Gould with St. Stephen's Memorial Episcopal Church in Lynn told the committee at the hearing. "Yet during this same period, taxes have decreased. It's time for the 1 percent to pay their fair share." Barbara Madeloni of the Massachusetts Teachers Association told the committee, "Our classrooms lack crucial resources, college students struggle with crushing debt, roads and bridges are crumbling, and parents are unable to access high-quality, affordable preschool." Proponents want revenue raised from the surtax to be used only for public education; public colleges and universities; and the repair and maintenance of roads, bridges, and public transportation, subject to appropriation by the legislature.
Surtax opponents told the committee that the state already relies too much on the income tax as a source of revenue, and are concerned “…that [not enough] the money [from the surtax] will go for its intended purpose."
Others pointed out that the tax would apply to fewer than 20,000 taxpayers, who would have to pay an average of more than $100,000 in tax apiece. And John Regan of Associated Industries of Massachusetts said, "As a mathematical proposition, those earning $1 million in income a year currently pay 95 percent more in income tax than those making $50,000 a year." The surtax "seems like a massive increase, and it seems anything but equitable to me," Regan said, adding that the surtax would impede investment and employment in the state. Regan also pointed out that General Electric Co. recently chose to move its headquarters to Massachusetts from Connecticut. "This company is leaving its current home state in part because of concerns about unfair taxation," he said.
Secretary of the Commonwealth William Galvin (D) in December reviewed submitted signatures and gave clearance to the petition to proceed to the next step. Because of the requirements involved, the earliest the measure could appear on the ballot is November 2018.
Presently Massachusetts imposes a flat, basic personal income tax rate of 5.1 percent on wages and most other types of income, and a separate flat rate of 12 percent on income from short-term capital gains and on some types of long-term gains on the sale or exchange of collectibles.