Editor's note - John R. Regan, Executive Vice President of Government Affairs for Associated Industries of Massachusetts (AIM), will deliver the following comments today to the Joint Committee on Revenue in opposition to H.3933, An Initiative Petition for An Amendment to the Constitution of the Commonwealth to Provide Resources for Education and Transportation through an additional tax on Incomes in excess of One Million Dollars (Ballot Initiative 15-17)
It is no accident that we call ourselves a “commonwealth.”
The preamble of the Massachusetts Constitution says, “the body politic is formed by a voluntary association of individuals: it is a social compact, by which the whole people covenants with each citizen, and each citizen with the whole people.”
This notion is affirmed in the language of Article XLIV of the Constitution, which states that taxes “shall be levied at a uniform rate throughout the commonwealth upon incomes derived from the same class of property.”
Now comes this petition for an amendment changing the language of Article XLIV in a manner that would increase by 78 percent taxes paid by those with incomes in excess of $1 million, adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets.
As a mathematical proposition, those earning $1 million of income per year currently pay 95 percent more tax than those making $50,000 annually. Income of $50,000 generates a tax obligation of $2550, while the $1 million dollar income generates $51,000 of income tax (all things being equal). According to the ballot question language, every dollar of income above a million will be subjected to a surtax of 4 points over the current 5.1%
Since the procedural options for the committee are limited, AIM will leave to the wisdom of the voters the equity and advisability of a 78 percent increase of the tax obligation for fewer than 1 percent of our fellow citizens
Some facts are important to note:
- This significant new tax burden will fall on individuals and certain business entities paying taxes at the individual rate; it is hard to imagine that this new obligation will not impede investment, employment and certain locational decisions.
- The Department of Revenue estimates (with some assumptions) that the proposal could generate $1.6 billion to $2.2 billion, with $1.9 billion identified as the median.
- The $1.9 billion tax increase would be paid by roughly 19,500 filers, 80 percent of whom are anticipated to file with some business income.
- Those 19,500 filers represent half of 1 percent of all tax returns filed with the Department of Revenue.
- Eighty-six percent of the affected taxpayers would be married couples filing jointly, and 11 percent would be individual filers with earnings of more than $1 million.
Many advocates for this ballot question focus on the revenue derived therefrom as opposed to the uneven method of its generation. Setting aside the fairness, or lack thereof, I would like to turn to the issue of how the new revenue is to be used.
The language of the question states that the revenues raised by the new tax shall be used “…to provide the resources for quality public education and affordable public colleges and universities, and for the repair and maintenance of roads, bridges and public transportation, all revenues received in accordance with this paragraph shall be expended, subject to appropriation, only for these purposes.”
Section 2 of Article XLVIII of the Constitution clearly enumerates so-called “Excluded Matters” by stating in part, “No measure… that makes a specific appropriation of money from the treasury of the commonwealth, shall be proposed by an initiative petition…”
So for the question to be constitutionally valid, the legislature would retain the ability to use the new revenue derived from the 78 percent tax increase for any public purpose the legislature deems appropriate.
Any representation about how the money is used is wishful thinking that the constitution itself prohibits.
Last week, the commonwealth was successful in landing the eight largest corporation in the world to Boston. This company is leaving its current home state in part because of concerns about unfair taxation. We should look long and hard at this question that raises so much from so few and ask, does this imbalance make the commonwealth a better, or a worse place?
AIM would suggest that it makes Massachusetts an unfair place.