Massachusetts legislators are expected to vote Wednesday to put the so-called millionaire’s tax on the 2018 election ballot. A new report from a well-respected fiscal watchdog group warns the proposal to raise taxes on the rich to bring in more revenue could backfire.
The proposed amendment to the Massachusetts Constitution would put an additional 4 percent tax on annual incomes topping $1 million. Advocates say it would bring in an additional $1.9 billion a year to spend on transportation and education. And, fewer than 20,000 people would be affected by the higher tax rate.
It sounds like an appealing idea, until you dig deeper, according to Eileen McAnneny, President of the Massachusetts Taxpayers Foundation.
" There are lots of fiscal implications to this question we really think should be answered," she said in an interview Tuesday.
An analysis of the tax proposal by the business-backed think tank warns that if the income surtax becomes law, the highest income taxpayers in Massachusetts would have “substantial incentive” to move out of state.
The foundation’s report delivered to legislators two days before the scheduled vote said that if just one-third of the 900 state taxpayers who make more than $10 million a year were to leave the state, projected revenue would drop by $750 million.
McAnneny argues that even if the proponents’ revenue projections from the millionaire’s tax come true it would not solve the problems with the state budget that have plagued Beacon Hill for years.
" The legislature could not allocate the money presently going to transportation and education so there would not be net new revenue going to those spending areas," said McEnneny.
Another big point made by the foundation is that the tax could not easily be repealed if it proves to be bad policy.
"It is very difficult to change the constitution by design, so if there are problems with this new tax increase the legislature does not have the ability to change it," warned McAnneny.
Raise Up Massachusetts, the coalition of community organizations, religious groups, and labor unions that is behind the amendment, blasted the foundation’s analysis as “wrong on the law and wrong on the impact.” The group, in a statement, accused the foundation of deliberately trying to mislead legislators and the public.
Noah Berger, president of the left-leaning Massachusetts Budget and Policy Center, sided with Raise Up Massachusetts and said studies have shown that when other states like New York raised taxes on the wealthy it did not result in a mass exodus.
" The states that have strong high-wage economies are the states that have a well-educated workforce and if you can make investments to build that kind of workforce that, in the long run, is important for your economic strength," said Berger.
Berger said the proposed amendment would make the Massachusetts tax system fairer.
" Our highest income taxpayers actually pay the smallest percent of their income in state and local taxes," said Berger.
The legislature in a joint session in May 2016 voted 135-57 to advance the constitutional amendment. The initiative needs the approval of 50 legislators at Wednesday’s scheduled joint session to be placed on the November 2018 ballot.