Massachusetts’ Millionaires Tax

Editorial to the Lawrence Eagle Tribune

Over the past several years, there are two words that have, more than any other, sent Massachusetts lawmakers scurrying for cover: “tax increase.”

This state shed its infamous “Taxachusetts” moniker many years ago, when lawmakers rolled back a number of onerous taxes that had made the state a pariah for many companies and individuals. Every year for the past several years, top lawmakers such as House Speaker Bob DeLeo have expressed the sentiment that there is “no appetite” on Beacon Hill for tax hikes.

The tax rollbacks and the Legislature’s stand on taxes is a strategy that has made this state more competitive. Boston is one of the top 15 creators of new-economy jobs in the nation, according to Bloomberg.

A well-considered tax strategy can lead to job growth and economic expansion, and a habit of sticking to the strategy is something that long-term business investors seek.

But for some lawmakers, the old habits die hard. Take longtime state solon and current Senate President Stanley Rosenberg, for example.

The Amherst Democrat, speaking before a crowd of labor union representatives this week, trumpeted his support for a graduated income tax that would place a 4 percent surcharge on anyone who earns more than $1 million per year. You can sure more and more people will wind up paying the surcharge as legislators tinker with the tax code once the flat income tax is replaced by the grad tax.

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That money — perhaps $2 billion initially — would be used to create good-paying middle-class jobs and pay for better education, said Rosenberg. More money for road repairs and teachers, that’s the promise. Cue the thunderous applause.

Ah, yes, the rich. They don’t pay enough. Make them pay more. It plays well with many audiences, probably most audiences these days.

But this simplistic “solution” is a worn-out platitude to the working middle class. It feeds the worst impulses of politicians and the public, and in the end, it doesn’t accomplish what Rosenberg and other supporters claim.

If the surcharge were to pass, Massachusetts would regain its Taxachusetts reputation. It would have the third-highest graduated income tax rate in the nation, according to the State House News Service. Its impact on job growth is something that is harder to determine, but certainly it would give pause to start-up executives who want to locate in the Northeast. Consider, for example, that although Boston placed No. 15 in the nation for high-tech job creation in Bloomberg’s study, Manchester, New Hampshire, placed No. 6. Part of the reason for its high ranking is its tax policy. New Hampshire, which has no state income tax or sales tax, will no doubt use the millionaires’ tax to lure more businesses over the border.

The bigger problem for Bay Staters is the way that Rosenberg and other top lawmakers have punted down the road one of the worst fiscal problems in the state — the cost of universal health care, or MassHealth. A decade ago, when Massachusetts became the first state in the nation to pass universal health care, lawmakers failed to take action on a known ramification, controlling costs. Politically, it’s far easier to just pass the costs on to taxpayers, rather than face an office full of angry lobbyists.

As a result, the amount of money that taxpayers shell into the health care system is growing wildly. It now consumes half of all state spending, and most of the new tax revenue being generated annually is being fed into it, according to the Massachusetts Tax Foundation, a budget watchdog group. Little wonder why we have no money left over to put toward increased spending on schools and roads.

The problem with MassHealth will be punted even further down the road if Rosenberg gets his graduated income tax. With such a huge influx of money, there’s even less incentive to fix the spending problems.

The “tax the rich” mantra is the battle cry of politicians who lack the fortitude to take on the tough problems they had a hand in creating.

Please see the earlier post dated January 29, 2016 to view the list of representatives in favor of the bill (H3933). Representative Arciero is on the list. House Bill 3933 is a MA Constitutional Amendment that reads:

Amendment Article XLIV of the Massachusetts Constitution is hereby amended by adding the following paragraph at the end thereof:

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 residents, this $1,000,000 (one million dollar) 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, 2019.

This amendment will be heard in Joint Session on May 18, 2016.

 

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