Cherrytree Group Blog

Massachusetts Supreme Court Rules on Millionaire Tax Plan

[fa icon="calendar"] Jun 19, 2018 9:30:00 AM / by Samuel Kirshenbaum

Monday, June 18, 2018 marked a huge judicial victory for Massachusetts businesses lobbyists and corporations. In a 5-2 decision, the state Supreme Court ruled against the imposition of a surtax on all incomes over $1 million dollars, thereby derailing a plan that would have raised the state income tax by 4 percentage points per dollar for those taxpayers earning above $1 million dollar.  All expected revenue from this tax plan was earmarked for state funding of education and transportation, which would have increased departmental revenue projections from $1.6 billion dollars annually to $2.2 billion dollars annually.

Ultimately, the court interpreted the tax plan as an improper combination of the graduated income tax, violating the state constitution by posing two unrelated questions to voters. The first being whether the people of Massachusetts favored the surtax to begin with. The second question postulated whether voters favorited the required appropriations to the education and transportation departments. Not only did the court find no purpose in the proposed taxation but found this ruling to set an imperative precedent of a codifying fixed tax rate into the state constitution. The dissenting justices countered that, "[p]rohibiting the people from voting on this petition undermines the legislative power given to the people to draft and enact laws in a manner that is incompatible with the separation of powers principles”. Prior to this ruling, the voters of the Commonwealth had rejected this idea of a graduated state income tax on five separate occasions, first in 1962, then 1968, followed by 1972, 1976, and most recently in 1994.

For business lobbyists, this ruling symbolizes a huge financial victory in a state that trends towards liberal court rulings.  Most opponents of the ruling had no opposition to the end game of increased state funding for education and transportation, instead they condemned the manner in which the constitution was being violated.  Following Monday’s ruling, James Rooney, CEO of The Greater Boston Chamber of Commerce, expressed his satisfaction with the court ruling by proclaiming that, “[t]he Supreme Judicial Court rightly recognized that the ballot language is an overreach that runs afoul of our state’s constitution. While increasing investments in education and transportation are worthwhile goals, relying on the highly volatile income tax to do so is shortsighted and puts our state’s competitiveness and budget at significant risk”.  Proponents of the tax plan took a more of a benevolent sentiment regarding implementation, calling for aid by the rich to help out the lower classes.  State Senator Karen Spilka outlined opportunity gaps and income inequality in her Monday comments following the ruling, arguing that by increasing the tax, the future of the workforce would be better educated, and the economy of the state would be improved by increased business transit.

Nevertheless, voters in upcoming elections this November’s will be faced with ample opportunities to affect the business climate of the state, as ballots for a $15-dollar minimum wage; paid employee medical leave for families; and reductions of the state sales tax will appear on the ballot.  Given that the implementation of the graduated tax is off the ballot, there may be a much greater possibility of achieving a “grand bargain”, meaning that the legislature can draft consensus bills on all three measures.

Samuel Kirshenbaum

Written by Samuel Kirshenbaum

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