State Rep. Jay Kaufman, D-Lexington, chairman of the Joint Committee on Revenue, argued in favor of the amendment, saying the state needs more money. “We have an unsustainable tax system. We’re not able to raise the money that we need to provide in order to fund fundamental services for the citizens of our cities and towns,” Kaufman said.
To pass, the constitutional amendment needed 50 votes in the 200-person State Legislature at Wednesday’s constitutional convention, and must pass by the same margin in a second vote next year. It must then get support from a majority of voters in the November 2018 election.
The amendment received support from 135 lawmakers in Wednesday’s vote, with 57 voting against it.
Currently, Massachusetts has a flat tax, which means everyone pays 5.1 percent of their income. That is scheduled to gradually decrease to 5 percent.
The proposed constitutional amendment would raise the tax rate by 4 percentage points on income over $1 million. So if the flat tax in 2019 is 5 percent, someone earning $1.3 million would pay 5 percent on the first $1 million of income and 9 percent on the next $300,000.
The Department of Revenue estimates that the proposed tax rate would raise an additional $1.9 billion in 2019, around $1.7 million measured in today’s dollars.
Amendment supporters call it the “fair share” amendment, arguing that it will require wealthy people to pay their fair share for state services. They note that although high earners pay more taxes, measured in dollars, they pay a lower percentage of their income than poorer people to state and local taxes, including sales and property taxes.
Raising taxes across the board, Kaufman said, “would disproportionately impact those least able to afford it while continuing to favor those who are most able to afford it.”
State Sen. Ben Downing, D-Pittsfield, a member of the Revenue Committee who supports the amendment, said, “We need more investments in education and transportation, especially in Western Massachusetts, if we’re going to grow the economy and create economic opportunities we want for everyone.”
Downing said he believes the public should get a chance to vote.
Opponents say the amendment would hurt wealthy taxpayers, who are the most likely to create jobs and generate economic activity, and who are most likely to leave the state because of high tax rates.
State Senate Minority Leader Bruce Tarr, R-Gloucester, said the proposed tax increase would place the burden of funding transportation and education on a small group of residents, who may leave. The amendment, Tarr said, would “send a message in Massachusetts if you achieve success, the reward is nearly a doubling of your taxation.”
Tarr said voters previously rejected moving toward a graduated income tax, in which wealthy individuals pay a higher rate. “We have for decades embraced the theory that all the citizens of Massachusetts are equal, and taxation will be applied equally,” Tarr said.
State Rep. Geoff Diehl, R-Whitman, said once the tax system is divided into two brackets, that creates a precedent to adopt more brackets, “ultimately hitting the middle class the hardest once high income earners move out of state.”
The ballot question says the money would be used for education and transportation. Because a ballot question cannot allocate money, opponents of the ballot question say the Legislature could divert the money elsewhere – although supporters dispute that.
Tarr said the Supreme Judicial Court should decide whether the amendment is constitutionally allowed to require future legislatures to allocate money that way. Lawmakers can ask the court for guidance, although they have not yet done so here.
State Rep. John Velis, D-Westfield, was among the Democrats who joined Republicans in voting against the amendment.
“In Massachusetts, we need to do what we can to reward our most industrious citizens,” Velis said. “If we impose these new types of taxes and penalize our most industrious citizens, we run the risk of them leaving.”
Velis said residents are still hurting from the 2008 recession, and Massachusetts should be inviting businesses in, not penalizing successful business people.
“Now’s not the time to dig deeper into people’s wallets,” Velis said.
State Rep. David Nangle, D-Lowell, said the amendment “is the introduction of class warfare.” If it passes, Nangle said, lawmakers are likely to continue to seek more revenue from taxpayers in lower and lower income brackets.
The amendment is being pushed by Raise Up Massachusetts, a coalition of unions, religious leaders and liberal community organizing groups.
Steve Crawford, a spokesman for Raise Up Massachusetts, said he is optimistic the amendment will reach the ballot and pass. “I think people understand that we need to invest…in transportation and education… and that asking the wealthiest people in the state to pay a little bit more is the fair thing to do,” Crawford said.
Phil Edmundson, past chair of the Alliance for Business Leadership, a progressive business group, and area chairman of Arthur J. Gallagher & Co., said, “The future strength of our economy depends on our ability to make investments in education and transportation. The fair share tax calls on the most fortunate among us to contribute a bit more to that cause, in order to help create growth and opportunity for everyone in Massachusetts.”
According to 2013 Department of Revenue data, the most million-dollar earners in Massachusetts – 1,617 – lived in Boston. The communities with the highest concentrations of million-dollar earners are Weston, Dover and Wellesley, suburbs west of Boston.
Several amendments were debated on the constitutional convention floor, mostly proposed by Republicans, but none passed. Among other amendments, Tarr and House Minority Leader Brad Jones, R-North Reading, tried to require a supermajority vote any time money is spent from the state’s rainy day fund and tried to lower the flat tax rate to 5 percent.