Millionaire’s Tax Removed from Massachusetts’ State Ballot - A Global Tax Blog Article from KLR

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Millionaire’s Tax Removed from Massachusetts’ State Ballot

posted Jun 18, 2018 by Paul Nadeau Jr., CPA, MST in the Global Tax Blog

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The Supreme Judicial Court (SJC) has rejected a proposed “Millionaire’s Tax” that would raise the state income tax on Massachusetts’ highest earners and use the money for transportation and education purposes. What impact will this have on the Commonwealth? Read on.

The Court’s Decision

In a split decision, the court sided with business groups that argued the proposal was unconstitutional. The ballot question proposed adding a 4% surtax on any portion of an individual's annual income in excess of $1 million —something that opponents said would place an unfair burden on the state’s successful residents and overall business community.

The ballot question was ultimately struck down by the Massachusetts SJC, in a 5-2 ruling.  The court's ruling indicated the question should not have been certified by Attorney General Maura Healey because it specifically earmarked the related tax dollars.  In this the tax dollars were to go to transportation and education.  The state constitution "relatedness" clause prohibits ballot questions from joining the spending of tax dollars with the taxing itself.

Reasons the court sided with opponents

The court ruled in favor of business groups saying that ….

  • Earmarking funds for specific purposes is unconstitutional
  • The initiative did not give voters the ability to choose between supporting transportation or education (if they didn’t want to spend the additional funds on both)
  • The surtax would hurt the state's economy by causing wealthy taxpayers to move out of state to a more tax friendly state.

Some “ripple effects” of the court’s decision

  • Supporters of the tax say that without the potential of the additional revenue, lawmakers will need to be creative to find new sources of revenue.
  • Some believe that the ruling could indirectly impact other proposed ballot questions, like a proposed state sales tax reduction, a $15 minimum wage and mandatory paid family leave for all MA employees.

The block of the millionaire's tax from the 2018 ballot does not necessarily mean the end of this issue.  Supporters of the issue indicate the question will be revived in a different form for 2019.

Questions on the court’s decision? Reach out to any member of our Tax Services Team.