Everything You Need to Know About the ‘Millionaire Tax’ Proposal in Massachusetts
Lawmakers in Massachusetts will be debating bill H 3933 this week, a proposed constitutional amendment that is being called the “millionaire tax.”
According to the Associated Press, the House and Senate are set to hold a constitutional convention on Wednesday to evaluate the possibility of instituting the surtax, although it will have to pass through many more hoops before becoming law.
If you’re still a bit confused by the proposal, here’s a quick breakdown of everything you need to know about the so-called “millionaire tax.”
What Exactly Is It?
As its moniker suggests, the proposal would increase the tax rate by 4 percent on individuals who have an annual income of $1 million or above. People who make less than $1 million per year would not see an increase in their taxes.
While the income tax rate in Massachusetts is a flat 5.15 percent for everyone, and is expected to decline to 5 percent, the measure would bump up the rate for millionaires in the state to 9 percent.
According to the bill, the income level threshold would be “adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets.” The idea is to “ensure that this additional tax continues to apply only to the commonwealth’s highest income residents.”
The proposed constitutional amendment would impact the roughly 14,000 millionaires in Massachusetts, according to the Boston Globe.
Where Would the Money Go?
The funds raised from this tax would go to two very specific areas: education and transportation.
The bill states that the tax would “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.” Funds generated would be used “only for these purposes.”
According to Boston.com, the proposal could “generate upwards of $1.5 billion per year” if approved, while others believe that the number could be as high as $2 billion.
Who’s For It?
The Globe reports that a wide coalition of “labor unions, religious organizations, and liberal advocacy groups” back what they are calling the “Fair Share Amendment.”
Supporters includes organizations like Raise Up Massachusetts, the Massachusetts Teachers Association, the Massachusetts AFL-CIO, the Coalition for Social Justice, Massachusetts Communities Action Network, and the Jewish Alliance for Law and Social Action.
The people of Massachusetts seem to be fans of the proposal as well, since a new Globe poll found that 70 percent of voters would support the plan should it make to the ballot in 2018.
Similar measures, however, have failed to pass in previous years, most recently in 1994. Proponents are optimistic this time around due the recent change in cultural attitudes towards taxing the rich.
“That was a different time,” Raise Up Massachusetts cochairman Harris Gruman told the Globe. “People didn’t feel as threatened by economic insecurity.”
Supporters say that, although Massachusetts has a flat income tax rate, people in the middle class end up paying “a larger percentage of their income in sales and property taxes,” according to MassLive.com.
Who’s Against It?
The “millionaire tax” has its fair share of critics, particularly from business groups in the state.
The Citizens for Limited Taxation group told the AP that the tax proposal is “deceptive because there’s no guarantee the additional revenue would go to education and transportation.”
John Regan, executive vice president of government affairs for the Associated Industries of Massachusetts, told MassLive.com that the tax would end up being a 78 percent increase with regards to tax obligations for those making $1 million per year or more. He believes that such an increase “makes Massachusetts an unfair place.”
Interestingly, General Electric CEO Jeffrey Immelt doesn’t seem too bothered by the proposal. He told CommonWealth magazine, “I think whatever happens happens, and will impact us just like it impacts everybody else.”
While Gov. Charlie Baker hasn’t outright condemned the measure, he did say that he would “probably” vote against it should the proposal become a ballot question in 2018.
When Would It Be Implemented?
There a few steps that have to be taken before the amendment can turn into law.
The proposal must receive the support of at least 25 percent of lawmakers during two successive legislative sessions, including at this week’s constitutional convention.
Should the measure get the backing of enough lawmakers, the earliest that it could appear before voters would be 2018. If the people pass the proposal, the “millionaire tax” would go into effect starting January 1, 2019.