The Legislature will vote again tomorrow on an amendment to the state constitution to impose an additional four percent tax on the income of persons that exceeds $1 million annually.
This will be the second of two legislative votes the constitution requires for amendments that originate as initiative petitions. The proposed amendment received 135 “yes” votes from the 200 members of the Legislature last year, far more than the 50 necessary to advance. Another 50 or more “yes” votes tomorrow will put keep the amendment on track to appear on the 2018 statewide ballot.
But the closer the amendment gets to a popular vote the more opposition it attracts. For example, the Greater Boston Chamber of Commerce, which sat things out last year, is joining forces with other business groups in a legal challenge aimed at knocking it off the ballot.
And last year’s opponents are ratcheting up their efforts this year. Associated Industries of Massachusetts is running a multi-episode series entitled “The Constitutional Amendment Tax Trap” to puncture what it regards as myths (sample myths: the state has a revenue problem, the state needs to invest more in transportation, high income earners are not paying their fair share).
Likewise, the Massachusetts Taxpayers Association is rushing to the aid of the 19,600 residents of the state who would be subject to the additional tax, warning the rest of us against penalizing talent (their word) in this way. They offer an ominous scenario in which some — or all — of the top 900 of these residents (that is, those whose annual earnings exceed $10 million, aka, the top one-one hundredth of one percent) just take their ball and go elsewhere, leaving the state with less revenue than before. In other words, income inequality in Massachusetts has reached the point where it’s being suggested that our tax policy ought to beseech our biggest plutocrats not to leave.
Anyway, stay tuned – this battle isn’t over.
Why do we need an amendment for this? Can;t they just raise the rate?
The claim, disputed by some (including our former editor) is that the Massachusetts state constitution prohibits setting a higher tax rate on wealthy individuals.
The proposal is to raise the income tax rate on those with incomes in excess of $1 million/year, as opposed to an across-the-board increase.
Two comments:
1. This proposal, even if accepted, taxes only income. We desperately need a tax on WEALTH. At the income level we’re talking about, the affected taxpayers need only direct their portfolio managers to restructure their holdings in order to reduce or eliminate the impact of this tax.
2. The number of affected taxpayers — 19,600 — is striking. If income follows the same distribution as wealth (which I think it does), then it means that for each 10 household at the $1M level, there is one household at the $10M level. The fact that there are nearly 20,000 residents with incomes in excess of $1M means that the highest incomes are astronomically high.
The data that we so desperately need is VERY hard to acquire: a graph that shows the number of households across the horizontal axis, and the income reported by those households on the vertical access.
I’d like to know what the top 100 reported incomes were for 2016. I think we’ll find that it is staggeringly high.
We’re all going to need to memorize this in the coming months: Tax Flight Is a Myth
Higher State Taxes Bring More Revenue, Not More Migration
Legislators should absolutely vote to place the Fair Share Amendment on the 2018 ballot. Beacon Hill has no business taking away the right of the people of the Commonwealth to decide for themselves whether to ask people who make more than $20,000 a week to pay a little more.
We’re in the middle of a second full on budget crisis in two years. Just days ago we had an embarrassing downgrade of the state’s bond rating, And there are predictions that next year’s budget gap could be an eye popping $1 billion. If Beacon Hill is unwilling to vote for the revenue necessary to begin to solve this problem, the least they can do is allow the voters a voice in this important decision.
And do you endorse this amendment and will you campaign for it?
The standard flat tax rate is on income up to $1M so the 4% surtax only applies to income OVER $1M.
So unless you’re one of the 19,600 millionaires in the state, why wouldn’t you support it ?
Citizens for Limited Taxation sees a camel’s nose under a tent:
(PS – thanks for clarification tip – I edited the post)
Citizens for Limited Taxation – preventing communities from reaching their fullest potential since 1980:(
Part of me hopes their prediction comes true, and I wish the amendment were not written so specifically, but rather clarified that the General Court has the authority to levy a graduated income tax for any purpose they see fit.
Does the higher rate apply only to earned income, or does it also apply to capital gains, such as arising from the sale of a business?
It applies to unearned income too — all the same categories of income that are taxed now.