PITTSFIELD — Are the rich essentially getting a free ride in Massachusetts by paying the same state income tax rate as middle-income earners? Or are they already paying their fair share by virtue of the fact that most of the wealthy do pay the same proportion of their income as others?
That is the question at the center of a debate about the Fair Share Amendment, a proposed amendment to the state constitution that would clear the way for a proposed 4% surcharge on annual income beyond the $1 million mark. That income threshold will be subject to upward adjustment for inflation. The extra money would go toward education and infrastructure.
For at least 100 years, the state constitution has specified that if income is to be taxed in Massachusetts, it must be done uniformly by the state or, in layman’s terms, at a flat rate. That rate is currently 5% no matter how high the income. Thirty four states have progressive income tax rates, meaning that those in higher income brackets pay higher rates. Seven states have no income tax at all.
Several attempts have been made in Massachusetts to raise state income tax rates on the rich, most recently in 2018 when advocates successfully placed an initiative on the ballot that would have raised rates on the wealthy. But before it could be voted on, the initiative was stricken from the ballot after the state Supreme Judicial Court sided with business groups and ruled it unconstitutional, noting also that it unconstitutionally combined two independent subjects — spending on education and on transportation.
Now advocates are making another attempt, but it’s not a simple ballot initiative, as was the case three years ago. This time, they’re trying to amend the constitution by adding a paragraph to allow the new tax on incomes above $1 million in order, advocates say, for wealthier residents of the state to pay their fair share; hence the name of the movement.
To that end, both houses of the state legislature voted overwhelmingly on Wednesday to place the proposed amendment on the ballot in November 2022. The vote took place the day after ProPublica, the nonprofit investigative media outlet, published a bombshell story revealing that America’s richest billionaires paid little to nothing in personal income taxes over the last several years.
Fair Share Amendment advocates staged a rally yesterday at Park Square in Pittsfield. They demanded that wealthy Bay State residents pay higher rates or, as one speaker put it, “cough it up.”
About 50 people attended the rally. Many of them, including the speakers, were members of unions representing public education teachers, staff, and administrators. They were unanimous that the state needed to do a better job of funding public education, both K–12 schools and higher education.
“We’re looking at a revenue source that is estimated between $1.5 and $2 billion a year … that is a good amount of money to improve our educational system and infrastructure,” said Neil Clarke, a member of the Massachusetts Teachers Association and a retired teacher in the Lee Public Schools.
See video below of Neil Clarke urging support for the Fair Share Amendment Thursday at Park Square in Pittsfield:
“Some of us are working two or three jobs in order to support our families,” added Sandi Amburn, president of the paraprofessional unit of the local chapter of the American Federation of Teachers. “We need to ask these millionaires to cough it up. It’s been too long.”
But Peter White, a Pittsfield city councilor, said the battle has just begun. The bill to place the Fair Share Amendment on the ballot passed in a joint session by a resounding margin of 159–41 and polling shows the amendment’s approval rating at about 70%, but White said powerful forces are lining up against it.
“Now the real work begins convincing our community members we need to support this,” White said.
State Sen. Adam Hinds, D–Pittsfield, voted for the measure and echoed White’s sentiments: “We’ve got a lot of work because this isn’t just the kickoff for our campaign. It’s the kickoff of the campaign of people trying to defeat this.”
Gov. Charlie Baker has indicated he does not support the measure, both because state revenues are strong and state and local governments in Massachusetts have $10 billion in federal COVID-19 relief funds from the recent American Rescue Plan. He also fears some wealthy residents might flee the state, known as the “millionaire with a suitcase theory.”
Does the theory hold water? There are cases in which so-called “millionaire taxes” do appear to have driven the wealthy away, as happened in Maryland about 15 years ago, costing the state $1.7 billion in revenues, though that assertion has been challenged by others.
In California, which in the last few years saw a huge income tax increase on wealthy residents to a highest-in-the-nation 13.3% rate, the results have been mixed. Conservative groups in the Golden State say the rich are leaving in droves. Others insist that more rich people are moving in than leaving. And there is strong evidence that wealthy people moving into San Francisco and Silicon Valley and driving up housing costs for everyone is a far more serious problem than wealth outmigration.
Baker has also argued that his fears that the wealthy might flee Massachusetts are stronger than ever because post-pandemic work patterns will allow for more high-earners to be employed remotely, enabling them to move more easily to lower-tax states such as New Hampshire and Florida.
Even before 2018, several efforts to tax the wealthy at higher rates had been made in Massachusetts, despite the constitutional prohibition against it.
“Five times in the modern era — in 1962, 1968, 1972, 1976, and 1994 — tax-and-spend liberals have invited voters to discard that rule and make it legal to soak the rich at higher tax rates,” wrote conservative Boston Globe columnist Jeff Jacoby. “Five times voters have said no.”
See Edge video below of Liz Recko-Morrison of Berkshire Community College arguing in favor of the Fair Share Amendment yesterday in Pittsfield:
And is the Fair Share Act really “fair?” As recently as 2017, those with annual incomes at $1 million and beyond constituted just 0.5 percent of the state’s approximately 3.8 million income-tax filers, but they accounted for 24% of state income tax revenues, according to the state Department of Revenue.
But Hinds expressed the frustration of many when he noted that wages have not kept pace with inflation over the last 40 years at least. No matter how hard workers worked, they could not get ahead.
“From World War II to the ’70s, basically everyone was benefitting in the economy,” Hinds said. “Then something changed in the late ’70s. Something drastically different started to happen in our economy, and it’s not because the 90% aren’t working hard. We saw hours get longer, taking on multiple jobs, wages stagnating.”
At the same time, Hinds added, roads and bridges started to crumble, and the cost of higher education went up.
“As a city councilor, I hear all the time how we need to fund education, take better care of our roads, our sidewalks, and infrastructure,” added White. “How do we do it? We need new revenue sources … We know that working families are struggling. We can’t ask more from them.”
On Tuesday, Nov. 8, Bay State voters will decide whether to add the following paragraph to the state constitution:
To 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, all revenues received in accordance with this paragraph shall be expended, subject to appropriation, only for these purposes. In addition to the taxes on income otherwise authorized under this Article, there shall be an additional tax of 4 percent on that portion of annual taxable income in excess of $1,000,000 (one million dollars) reported on any return related to those taxes. To ensure that this additional tax continues to apply only to the commonwealth’s highest income taxpayers, this $1,000,000 (one million dollars) income level shall be adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets. This paragraph shall apply to all tax years beginning on or after January 1, 2023.
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