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Court Disallows Millionaire's Tax

Posted by Christopher Geehern on Jun 18, 2018 10:04:01 AM

The Massachusetts Supreme Judicial Court today disallowed a proposed constitutional amendment that would have imposed a surtax on incomes of more than $1 million and earmarked the money for transportation and education.

ScalesofJusticeVerySmallThe court, ruling in a case brought by AIM President Rick Lord and four other business leaders, decided that the initiative violated the state constitution by posing two unrelated questions to voters – whether they favored the surtax and whether they favored the required appropriation to transportation and education - in the same referendum.

The amendment would have imposed a new graduated income tax of 9.1 percent on all incomes more than $1 million. AIM believed the amendment would have had a devastating effect on the Massachusetts economy by increasing taxes for some 17,000 “pass-through” businesses that pay income tax at the individual rate.

“We are gratified that the Supreme Judicial Court agreed with the business community that the proposed question improperly combined a graduated income tax that has been rejected multiple times with spending requirements meant to appeal to voters,” Lord said.

“The lawsuit was not about public policy, but about preserving the integrity of the initiative petition process. The court did just that.”

The five plaintiffs lead organizations that represent the full breadth of the Massachusetts economy and are united in their commitment to ensuring that the commonwealth continues to foster conditions that support job development and economic growth. They are: Christopher Anderson, President of the Massachusetts High Technology Council, Inc. (MHTC); Christopher Carlozzi, Massachusetts State Director of the National Federation of Independent Business (NFIB); Mr. Lord; Eileen McAnneny, President of the Massachusetts Taxpayers Foundation (MTF); and, Daniel O’Connell, President and Chief Executive Officer of the Massachusetts Competitive Partnership (MACP). 

The named defendants in the lawsuit were Attorney General Maura Healey and Secretary of State William Galvin. 

The Supreme Judicial Court heard oral arguments in the case on February 5.

"We conclude that the initiative petition should not have been certified by the Attorney General as 'in proper form for
submission to the people,' because, contrary to the certification, the petition does not contain only subjects
'which are related or which are mutually dependent,' pursuant to art. 48, The Initiative, II, § 3, of the Amendments to the Massachusetts Constitution, as amended by art. 74 of the Amendments," the court wrote.

"The matter is remanded to the county court, where a judgment shall enter declaring that the Attorney General's certification of Initiative Petition 15-17 is not in compliance with the related subjects requirement of art. 48 and
the petition is not suitable to be placed on the ballot in the 2018 Statewide election."

The court found no common purpose in the taxation and spending elements of the proposed amendment.

"...(W)e are unable to discern a common purpose or unified public policy that the voters fairly could vote up or down as a whole. The two subjects of the earmarked funding themselves are not related beyond the broadest conceptual level of public good. In addition, they are entirely separate from the subject of a stepped rather than a flat-rate
income tax, which, by itself, has been the subject of five prior initiative petitions. Because a reasonable voter could not fairly accept or reject the petition as a unified statement of public policy, Initiative Petition 15-17 does not meet the relatedness requirement..."

The court decision may expedite ongoing negotiations among the business community and progressive groups to compromise on three other potential fall ballot questions – one establishing paid family and medical leave, a second increasing the minimum wage to $15 per hour and a third reducing the state sales tax. The chances of achieving a so-called “grand bargain” under which the Legislature would pass consensus bills on the three issues are significantly greater with the graduated tax now off the ballot.

Lord said the tax initiative was dangerous because it would have enshrined tax rates in the state constitution.

“Amending the constitution to achieve taxing and spending by popular vote is just a terrible idea, and could undo much of the good work that Massachusetts has done in terms of creating a successful economic climate,” he said. 

Massachusetts voters have previously rejected five proposals to change the Constitution to allow for a graduated state income tax: in 1962, 1968, 1972, 1976, and 1994.

Topics: Richard Lord, Massachusetts Supreme Judicial Court, Income Surtax

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