Editorial Staff

Report: Proposed Graduated Income Tax Might Not Increase State Education and Transportation Spending

/in , , , , /by Editorial Staff
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

Legislature could devote new revenue to public education and transportation, but cut funding from existing sources by the same amount

BOSTON – While supporters of a Massachusetts constitutional amendment that would impose a 4 percent tax rate hike on annual income over $1 million claim additional revenue from the surtax will fund public education and transportation needs, the amendment in no way assures that there will be new spending on these priorities. In fact, without violating the amendment, total state education and transportation funding could stay the same or even fall, according to a new review published by Pioneer Institute.

Total state education and transportation funding is currently around $8.5 billion annually.  Under the proposed amendment, the Legislature could dedicate the nearly $2 billion in additional revenue supporters of the graduated income tax claim it would generate to education and transportation, but cut funding from other sources from $8.5 billion to $6.5 billion, leaving total state spending in those areas exactly where it had been before.

“As a practical matter, every dollar the graduated income tax generates could be siphoned off to some other purpose without violating the text of the proposed constitutional amendment,” said Kevin Martin, author of “The Graduated Income Tax Amendment – A Shell Game?”

The Massachusetts Constitution requires a flat income tax rate.  On five occasions in the last 60 years, voters were asked to amend the constitution to eliminate the ban on a graduated tax rate.  Each time they refused.

In the runup to the 2018 election cycle, proponents of a graduated income tax attempted to overcome the unpopularity of their cause by earmarking new revenue from a 4 percent rate hike on annual income over $1 million for public education and transportation spending.

The proposed constitutional amendment never made it to the voters. The Commonwealth’s Supreme Judicial Court (SJC) ruled in Anderson v. Healey that the proposed amendment violated a ban on citizen-initiated ballot questions that combine unrelated subjects, as the amendment proposed both a new graduated income tax and a directive that any additional revenues would go to two disparate spending areas.

The court’s assertion of a constitutional ban on combining unrelated subjects does not apply to constitutional amendments proposed by the Legislature. In 2019, Beacon Hill tax hike supporters responded to the court’s decision by voting to approve the graduated income tax in a constitutional convention vote. If passed at a second constitutional convention, the measure will be placed as a question on the 2022 statewide ballot.

Attorney General Maura Healey’s own brief in the 2018 case reads: “the Legislature could choose to reduce spending in specified budget categories from other sources and replace it with new surtax revenue.”

When the late SJC Chief Justice Ralph Gants asked the Attorney General’s counsel during oral argument whether she agreed that, if the graduated income tax passed, it “may or may not result in any increase in education or transportation spending,” counsel responded that the Chief Justice’s understanding was correct.

More recently, during legislative debates on the proposed ballot measure, an amendment was offered that would have required the new tax revenues to be spent incrementally on education and transportation, over and above what already is spent. That amendment was defeated.

“Massachusetts’ flat income tax rate of 5 percent has served the state well. The Bay State has outcompeted our regional rivals and drawn in jobs and investment from higher-tax jurisdictions like New York, Connecticut, and California,” said Pioneer Executive Director Jim Stergios. “The debate on the graduated tax is simply this: does the Legislature care more about attracting jobs and investment to the private sector, which represents 97 percent of Massachusetts workers, or will they bow to the wishes of powerful public sector unions who represent 3 percent of Massachusetts workers? The question is especially important now given how hard-hit private sector employment was by the pandemic.”

About the Author

Kevin Martin is a partner and co-chair of the Appellate Litigation Group at Goodwin Procter LLP in Boston, where he has practiced since 2001.  He was counsel for the plaintiffs in Anderson v. Healey, the 2018 decision in which the Supreme Judicial Court excluded the graduated income tax from that year’s ballot.  Prior to joining Goodwin, Kevin clerked for U.S. Supreme Court Justice Antonin Scalia (2000-2001), and Judge Laurence Silberman on the U.S. Court of Appeals for the District of Columbia Circuit (1999-2000).  From 2010-2011, he served as deputy independent counsel representing the SJC in an investigation into corruption in the Massachusetts Probation Department.  He currently is vice chair of the board of directors of the New England Legal Foundation.  Kevin graduated from Columbia Law School in 1999 and Georgetown University’s School of Foreign Service in 1996.

About Pioneer

Pioneer’s mission is to develop and communicate dynamic ideas that advance prosperity and a vibrant civic life in Massachusetts and beyond.

Pioneer’s vision of success is a state and nation where our people can prosper and our society thrive because we enjoy world-class options in education, healthcare, transportation and economic opportunity, and where our government is limited, accountable and transparent.

Pioneer values an America where our citizenry is well-educated and willing to test our beliefs based on facts and the free exchange of ideas, and committed to liberty, personal responsibility, and free enterprise.

Get Updates on Our Economic Opportunity Research

Related Content

David Dyssegaard Kallick on the Facts about Immigration

This week on JobMakers, Host Denzil Mohammed talks with David Dyssegaard Kallick, Deputy Director of the nonprofit, nonpartisan think tank Fiscal Policy Institute and Assistant Visiting Professor at the Pratt Institute, on the impact of immigrants in local and national settings.

Ely Kaplansky Goes from Immigrant to Inc. 5000 Insurance Entrepreneur

This week on JobMakers, host Denzil Mohammed talks with Ely Kaplansky, President & CEO of Kaplansky Insurance. Since 1974, Ely has created hundreds of jobs in Massachusetts and beyond, with 85 employees in 15 offices across the state today, and he has grown his business during the pandemic, such that Kaplansky Insurance was named to Inc. magazine’s "5000 Fastest-Growing Private Companies in America" list. His success fulfilled the dreams of his parents when they moved from Israel to America in 1955, with just the clothes on their backs and an aunt to take them in. Their journey began in the concentration camps of Germany, and Ely’s story is all about the opportunity and freedom America offers.

Semyon Dukach on the High Value of Immigrants for the U.S. Economy

This week on JobMakers, Host Denzil Mohammed talks with Russian-born entrepreneur Semyon Dukach about the high value of immigrants to the U.S. Dukach started a seed stage fund for immigrant tech founders, One Way Ventures, in response to the early restrictive moves of the Trump administration, particularly the Muslim ban. 

Renters’ Unsung Heroes: Small Landlords Endure Without Income or Relief

Hubwonk host Joe Selvaggi talks with MassLandlords’ Doug Quattrochi about ways landlords faced the challenges of being caught between tenants unable to pay rent during COVID-19 shutdown and having little or no programmatic relief from state and federal agencies.

Jo Napolitano on the Inspiring Stories of Immigrant Children

This week on JobMakers, Host Denzil Mohammed talks with Jo Napolitano, journalist, former Spencer Fellow at Columbia University, and author of the new book, The School I Deserve: Six Young Refugees and Their Fight for Equality in America, about the enterprising spirit of immigrants and refugees across the nation and at the U.S.-Mexico border.

Umesh Bhuju Seeks a Fair Deal for Immigrants, Farmers & the Environment

This week on JobMakers, Host Denzil Mohammed talks with Umesh Bhuju, owner of Zumi’s Espresso in Ipswich, Massachusetts, about how a business model based on selling nothing but fair-trade products can thrive in a world driven by profit. He describes his early experiences in his homeland of Nepal, where he witnessed child labor, and how that has shaped his pursuit of the American dream.

Study Says Massachusetts Surtax Proposal Could Reduce Taxable Income in the State by Over $2 Billion

As voters now begin to weigh the potential impact of a ballot proposal to increase taxes on business owners, retirees and wealthier households, a new literature review by Pioneer Institute shows that many existing academic studies find that wealthy individuals are particularly sensitive to changes in tax policy. Other studies explicitly warn policymakers that behavioral responses to taxing the rich could erode the tax base and ultimately strain state budgets.

Unintended Tax Consequences: Modeling the Effects of the Millionaire’s Tax on Massachusetts’ Economic Future

0 Comments
/
Hubwonk host Joe Selvaggi talks with Beacon Hill Institute President Dr. David Tuerck about his recent analysis of the proposed 4% surtax on incomes over $1 million in Massachusetts, and his estimate of the number of individuals who will leave the state as a result. Tuerck, an economist, used STAMP modeling tools comparing the static projections offered by proponents of the so-called "Fair Share Amendment" with a model simulation that accounts for the unintended effects of the tax.

Dr. Babak Movassaghi on Winning in Football & Healthcare Innovation

0 Comments
/
This week on JobMakers, Host Denzil Mohammed talks with Dr. Babak Movassaghi, founder of InfiniteMD (acquired last summer by ConsumerMedical), which connects patients with top U.S. medical professionals through second-opinion video consultations, guiding patients to better care. When the world shut down due to COVID-19, Dr. Movassaghi's company was already prepared to serve patients via telehealth. In this episode, they discuss his fascinating pivot from physics and professional football in Germany, to healthcare and innovation here in the U.S., an extension of his ability to navigate multiple identities as an Iranian-German living the American Dream.

COVID-19 and Unemployment Rates in the Cape and Islands 

0 Comments
/
  The COVID-19 pandemic has had a large impact on unemployment…

This Is No Time for a Tax Increase

This is no time to threaten Massachusetts’ prospects for an immediate economic recovery and the long-term competitiveness of the Commonwealth’s businesses. As Massachusetts lawmakers prepare to vote on whether to send a proposed constitutional amendment that would impose a 4 percent surtax on residents who earn $1 million or more in a year to the statewide ballot in 2022, Pioneer Institute urges them to recognize that tax policy sizably impacts business and job location decisions and that jobs are more mobile than ever.

Jitka Borowick on Starting a Small Business during COVID

0 Comments
/
This week on JobMakers, Guest Host Jo Napolitano talks with Jitka Borowick, Founder & CEO of Cleangreen, a cleaning service committed to environmentally-friendly practices, and Nove Yoga, launched during COVID. Jitka grew up under communism in the Czech Republic. Determined to learn English, she made her way to the U.S., initially with plans to stay for only one year - but ended up making it her home. Jitka shares the difficulties of learning another language and culture, her pathway to entrepreneurship, her courageous decision to open a new business during a pandemic, and how her companies have successfully adapted to the challenges so many small businesses have encountered over the past year.