No longer a political safety net, the death of the “millionaire’s tax” ballot question on Monday could put Beacon Hill Democrats in the hot seat leading into this year’s elections to either scale back their ambitious spending promises or produce an alternative tax plan.
The ballot question that was struck down by the Supreme Judicial Court on Monday, and its potential to generate as much as $2 billion a year in new taxes, has been held out for years by Democrats as a potential panacea.
How can the state afford to expand pre-kindergarten and invest in K-12 education? The millionaire’s tax. How could the state improve the reliability of the MBTA and expand rail service to western Massachusetts? The millionaire’s tax.
The highest court’s split decision invalidating the proposed 4 percent surtax on income over $1 million now throws the ball back into the court of the Legislature to decide whether they believe the state can thrive with its current revenue structure, or if another tax hike is in the offing.
“I think as we’re beginning the new legislative session we’ll take a look to see where we are relative to our tax revenues, what we expect for tax revenue. That process will begin in December and we’ll go from there. I don’t think right now we can talk about elimination of anything right now until we have those figures before us,” House Speaker Robert DeLeo said, calling himself “disappointed” with the outcome in the courts.
Senate President Harriette Chandler, who will hand the reins of the Senate to Ways and Means Chairwoman Karen Spilka in July, also said she was “terribly disappointed.”
“As I have said since January, without this Fair Share Amendment, we will need to be creative and take a hard look at potential revenues from new sources to address the very real challenges we face as a Commonwealth,” Chandler said.
The income surtax had the added political benefit of representing a revenue generating proposal that lawmakers wouldn’t have had to decide alone. While Democrats supported the proposal and voted twice to advance it to the ballot, it was the voters who would have ultimately decided the proposal’s fate.
And it seemed quite popular. Suffolk University poll results released last week found 66 percent of voters supported the surtax on wealthier residents, compared to 26 percent opposed.
Gov. Charlie Baker, arguably, walks away a clear winner having never taken a position on the proposal as he awaited the court’s decision, and now never having too. The governor’s silence and deference to the judicial process seemed to be a political calculation that paid off Monday, not having to choose between his hold-the-line-on-taxes reputation and a ballot question that seemed sure to pass and energize left-leaning Democratic voters in the process.
The Massachusetts Democratic Party Chairman Gus Bickford saw it differently, suggesting the decision has created a “crisis” for Baker now that a potential revenue stream to improve transportation and education has been eliminated. “Massachusetts residents deserve to know his plans to address these critical issues before voting for our next governor,” Bickford said.
The decision will force the two men running against Baker to recalibrate their campaign messaging. Both Jay Gonzalez and Bon Massie have been proponents of the surtax as a way to generate new revenue to make investments in pubic transit and education, including Gonzalez’s call for universal pre-kindergarten.
Gonzalez, after a debate with Massie in May, said that if the question failed he would propose “another progressive tax to raise the income we need,” but said he had not yet developed that plan. He doubled down on that Monday after the SJC decision was released, and now faces increased pressure to detail specifics about what such a tax plan might look like.
“Jay Gonzalez and Bob Massie owe the public an explanation as to which other taxes they intend to raise to pay for the billions they have proposed in new public spending,” MassGOP Chairwoman Kirsten Hughes.
While the ruling was a win for business groups – the Mass. High Tech Council, Mass. Taxpayers Foundation and Associated Industries of Massachusetts – that challenged the ballot question’s constitutionality, it was a notable defeat for Attorney General Maura Healey on two fronts, both because she supported the policy objective of the ballot question and had her office’s decision to validate the question overturned.
That loss, however, might not be as painful as the one dealt to the labor unions and community leaders in the Raise Up Coalition who spent four years pushing to get the proposed constitutional amendment through the Legislature and in position for a successful ballot drive, only to see that work discarded.
The decision might also impact other ballot questions, with the removal of the millionaire’s tax from the equation perhaps making it easier politically for business groups, the Retailers Association of Massachusetts and Raise Up to strike a deal over a minimum wage hike, paid family and medical leave and a sales tax cut.
For Retailers Association of Massachusetts President Jon Hurst, the millionaire’s tax has always been the lynchpin to him reconsidering a ballot proposal that would slash the 6.25 percent sales tax to 5 percent.
Some observers of the behind-the-scenes negotiations said they wouldn’t be surprised if Monday’s decision led to a quick settlement of “grand bargain” talks on Beacon Hill, and RAM board members have their weekly conference call on Tuesday on ballot negotiations that could lead to a resolution.
“The Retailers Association of Massachusetts remains prepared to take the sales tax reduction to the ballot this fall. At the same time, we remain open to negotiating a balanced legislative resolution that will give our Main Street businesses, and seniors and low-income families a helping hand,” Hurst said in a statement after the court ruling.
With one question and its potential billions in new revenue off the table and another question – a sales tax cut to 5 percent – that would reduce revenue still in the mix, Education Committee Co-chair Sonia Chang Diaz said elected officials have an obligation to address their failure to ensure quality education for all children, regardless of where they live.
But she also acknowledged, “There is no magical revenue stream coming any time soon.”
Rep. Jay Kaufman, a retiring Democrat from Lexington who for years has chaired the Revenue Committee, said the SJC’s decision should be taken as a “challenge” to the Legislature to restart the four-year process next year of amending the state constitution as “the one and only way to advance tax fairness.”
“Until the wealthiest among us pay their fair share, we are destined to live with inadequate state services and the gross inequity of our state taxes,” Kaufman said.
This article provided by NewsEdge.