Surtax Opponents Push Back On “Fair Share” Arguments

Hurst Recalls Lack Of Interest in Rolling Back Regressive Sales Tax

STATE HOUSE, BOSTON, OCT. 26, 2022…..With voters already weighing in on Question 1 via mail-in and early voting ballots, some well-known opponents of the proposed surtax on annual income above $1 million on Wednesday pushed back on the notion that high-earners are not already paying their “fair share” in taxes and argued that the additional tax revenue is not certain to actually improve education or transportation.

Voters have until Nov. 8 to decide whether to shift the state away from the flat income tax rate structure enshrined in the Massachusetts Constitution to allow for the surtax that is designed to raise an estimated $1.3 billion a year intended for transportation and education causes. If the amendment is approved, the first $1 million of household income would still be taxed at the current 5 percent tax rate and household income above that first $1 million would be taxed at an effective rate of 9 percent.

Surtax supporters have dubbed the measure the “fair share amendment,” but Massachusetts Taxpayers Foundation President Eileen McAnneny said Wednesday during a press conference hosted by the Coalition to Stop the Tax Hike Amendment that the “notion that millionaires don’t pay their fair tax and that we need to make our tax code more progressive” is overstated.

“The income tax rate is flat but our tax code is not, it’s highly progressive. And that’s because we have all kinds of provisions like the no-tax threshold, we have a refundable earned income tax credit, and a whole host of other things that ease the burden of lower-income taxpayers,” she said. “And currently, the top 20 percent of taxpayers pay 72 percent of all income tax collected in the commonwealth.”

Surtax supporters responded by pointing to a 2018 study from the Massachusetts Budget and Policy Center (which supports the surtax) showing that taxpayers in the lowest-income 20 percent paid 10 percent of their incomes in state and local taxes while the highest-income 1 percent of taxpayers paid 6.8 percent of their incomes, the smallest share of any group, towards state and local taxes.

“Right now, the richest 1 percent pay less of their income in state and local taxes than the rest of us do! Voters understand that the ultra-wealthy aren’t paying their fair share. The corporate lobbyists who oppose Question 1 agree that we need greater investments in transportation and public education. They’d just rather have the rest of us pay for it, instead of asking multi-millionaires and billionaires to do their part,” Andrew Farnitano, communications director for Fair Share Massachusetts, said.

Jon Hurst, president of the Retailers Association of Massachusetts, also questioned whether fairness was truly at the heart of the surtax effort. He said his organization was “actually a little late to the game on this proposal” and he recounted how RAM proposed a rollback of the state sales tax rate as a “counterbalance to the income tax surcharge” when the surtax was initially proposed for the 2018 statewide ballot. The disinterest in that idea of reducing the sales tax from 6.25 percent back to its former 5 percent level led him to question the motivation behind the surtax, Hurst said Wednesday.

“The reaction from the proponents as well as from legislative leadership was not positive, which raised in my mind the question, were the proponents really looking for fair taxation or just more taxation?” Hurst said. “They clearly didn’t want to roll back the sales tax, which is by far the most regressive tax on the books, even far more regressive today because of inflation.”

Also among those to urge voters Wednesday to fill in the “No” bubble next to Question 1 on their ballot was Jim Rooney, president and CEO of the Greater Boston Chamber of Commerce. A longtime advocate for improvements to the region’s transportation network and for an education system that helps produce the kind of workers chamber member businesses need, Rooney on Wednesday explained why he and the chamber are not on board with the proposal to raise more money for those causes with an income surtax.

“First of all, there’s no guarantee that it would provide money as stated,” he said, referring to the facts that the surtax amendment would not require the money it raises to actually be spent and that the Legislature could always just use it to supplant other funding sources. “The number two thing that I would say is that when you look at spending on transportation and in education, we already rank among the highest. I think we’re one of the highest in cost per mile of highway, we’re very high on cost per pupil on the education side. So we’re taking this approach of what’s happened in the past which is, ‘So let’s just get them more money to deal with these issues.’ I don’t think you or I or anyone on this call can say exactly, if they did get this money, what exactly they’re gonna do with it. What’s the output? What’s the improvement? I don’t know.”

For years, especially just before the pandemic upended normal work and commuting patterns, the business community has increasingly decried the Boston area’s public transportation woes as a hindrance to growth. Traffic and congestion on the roads all over the state make for long and frustrating commutes by car, and the unpredictable nature of public transportation in all regions frequently makes workers late to their jobs.

Rooney pointed out Wednesday that he and the chamber in 2019 supported an effort to increase the state’s gas tax and the fee built into ride service fares to help take care of immediate needs in the transportation world. More recently, he said, he and the chamber got behind the idea of a mobility pricing commission to study and make recommendations on things like congestion pricing and public transit fares.

That commission was included in the infrastructure bond bill that Gov. Charlie Baker signed in August, but the governor sent that section back with a proposed amendment to expand the commission (Rooney said he hopes the Legislature makes the changes). Rooney said the point of that commission “is to say, ‘Let’s take a step back and do something rational with the way we pay for our transportation and mobility, not lurch from crisis to crisis” doing things like imposing a surtax that he and others fear will make Massachusetts a less competitive place for businesses.

“So yes, in favor of giving and providing adequate resources for transportation and education,” Rooney said. “But no, not in favor of something that has such damaging consequences with no real promise that it’s going to mean anything.”