The Massachusetts House and Senate meet in a joint session today to consider an amendment to the state Constitution that would provide a new source of funding for state education and transportation needs through a tax on millionaires.
This is the Legislature’s second vote in the amendment process, and assuming support similar to the first vote of the Fair Share amendment in last year’s Constitutional Convention, it will go onto the state ballot for 2018. If the majority of voters support it at the ballot box, proponents say $1.9 billion will be made available for education and transportation starting Jan. 1, 2019.
The tax would not be applied to the first million dollars of income, with 4 percent applied to the “portion of annual taxable income in excess of one million dollars reported on any return related to those taxes,” according to the proposed amendment to Article 44 of the Massachusetts Constitution. The threshold would be adjusted annually to address changes in the cost of living, so the tax would be applied only to the top two-tenths of 1 percent of Massachusetts residents.
A similar revenue mechanism operates in the Bay State’s Community Preservation Act, which exempts the first $100,000 of property value from the tax. The extra revenue goes to an individual community’s priorities among affordable housing, and the protection of historical and open space resources.
Revenue from the Fair Share amendment would be limited to appropriations for education and transportation, and it would be a statewide tax, not local, like the CPA. The Legislature would be empowered to make specific appropriations — for example, to educational support from K-12 to college, or to projects that would fit in the full range of transportation projects, such as bridge and road repair, or a new Fairhaven bridge. That legislative discretion allows timely, effective appropriations, but it wisely constrains lawmakers to the two fields alone so the funds don’t slink away to other parts of the budget.
Massachusetts income tax is at 5.1 percent now. A resident who receives a million-and-one dollars would pay 5.1 percent on the first million — as usual — and 4 extra cents on the next dollar. If she makes $2 million, the effective rate will go from 5.1 percent to 7.1 percent, paying 5.1 percent on $2 million and 4 percent on $1 million. If she makes $5 million, she’ll pay a little more than 8 percent: 5.1 percent on $5 million, and 4 percent on $4 million.
Though some recoil at the appearance of a graduated tax, the inarguable capacity of most or all of the 15,000 millionaires in Massachusetts to pay the extra tax on income over a million dollars promises to pay for the kinds of improvements that will improve our workforce, health and stability through education. Better maintenance and improvements to transportation infrastructure keeps the pathways over which the traffic of business must travel open, fast and efficient.
Fears that eligible taxpayers would flee Massachusetts for states with lower rates are not supported by facts. Study after study shows that it is extremely rare for people to relocate because of higher tax rates. The most recent case of Kansas’ attempts to lure business with lower taxes adds another example. People stay where their million-dollar jobs are … they may have no similar opportunities in other states. They also stay where their family and friends are. This tax will not chase away our millionaires, but rather will further connect them to their homes by their support of the schools and jobs upon which our mutual prosperity depends.