EDITORIAL: If Prop 80 Makes Ballot, Voters Should Reject It
That feel-good bid to pick the pockets of the state’s highest earners just ran into another dose of reality, courtesy of a recent study that outlined its negative effects.
A proposed question on the November general election ballot -- whose constitutionality remains in doubt -- would add a 4 percent surcharge tax on annual income over $1 million. Known as Proposition 80, this “millionaires tax” would double the bill for Massachusetts’ top earners by more than $300,000. At least that’s the conclusion of a recent report issued by the Pioneer Institute, a Boston-based think tank.
Currently, Massachusetts imposes the same income tax rate -- currently 5.1 percent -- on every taxpayer. According to RaiseUp Massachusetts, the nonprofit coalition behind this money transfer -- the additional tax revenue would be used to fund the state’s transportation and education needs. Estimates indicate that extra 4 percent tax would generate a $2 billion annual windfall.
Using data from various sources, including the IRS, the Pioneer study concluded the proposed change would make Massachusetts’ top marginal income tax rate the nation’s fifth highest. That in turn would likely convince high-income earners to take up residence elsewhere. That’s because this pending referendum makes no distinction between successful entrepreneurs whose businesses employ thousands of Massachusetts residents and someone who attained millionaire status through the sale of property or inheritance income.
The pro-Proposition 80 crowd dismiss the potential mass migration of the state’s wealthiest as nothing more than fear mongering. Sure, these individuals may be reluctant to uproot their families, but the lure of a more favorable tax climate in a neighboring state like New Hampshire may persuade them to relocate their business -- and jobs -- there.
And this 4 percent surcharge may just be the last straw.
And that’s not idle speculation. Greg Sullivan, the Pioneer Institute’s research director, indicated that Connecticut’s high taxes were a contributing factor in General Electric’s and Alexion Pharmaceuticals’ decisions to move their headquarters to Massachusetts.
And then there’s the legality of this referendum question.
The state’s Supreme Judicial Court heard arguments by The Tax Foundation, an independent tax policy nonprofit, that Proposition 80 usurps the state Legislature’s authority over the state treasury. In other words, that body retains sole control over tax policy, not the general population. The state’s Constitution also prohibits petitions from including a “specific appropriation,” which means taking all revenue from a source and using it to fund a particular purpose, like transportation and education in this case.
The SJC heard those arguments on Feb. 6, and expects to rule on the ballot measure’s fate by early summer.
And for those who believe the state’s wealthiest don’t pay their fair share, think again. In Massachusetts, that 5.1 percent income tax rate may be the same for everyone, but 5.1 percent of $1 million generates considerably more in revenue than the median household income for Massachusetts -- $75,297 as of 2016.
No matter how you slice it, robbing from those who generate jobs and already pay far more in real estate, sales and personal-property taxes doesn’t add up.
If Proposition 80 makes to the ballot, Massachusetts voters should reject it.