Boston Globe: Yes on Question 1

The Editorial Board

Nov 1, 2022

The proposed constitutional amendment would make the state’s income tax fairer than it is now.

On Election Day in November 1915, the men of Massachusetts went to the polls and made two mistakes. First, they voted overwhelmingly against extending voting rights to women. Second, they inserted tax language into the state constitution that forbade the Legislature from enacting a graduated income tax. Ever.The suffrage vote soon became moot when the 19th Amendment to the US Constitution overrode state laws. The tax amendment, though — a century later, that’s still with us.As a result of that misguided amendment, Massachusetts can’t have what 32 states and the federal government take for granted: an income tax code that expects wealthy people to carry a heavier burden. The state income tax rate (currently 5 percent) is the same for everyone, regardless of individual circumstances.


In an ideal world, Massachusetts would simply get rid of the flat-tax requirement enshrined in 1915. That would allow our Legislature to do what most legislatures do: set and change tax rates and tax brackets in a fair way, and in response to the state’s needs and economic conditions.


Question 1, the only constitutional amendment on the November ballot, does not do that. Instead, it’s a much more complicated approach to making the income tax progressive, one that runs the risk of creating unintended consequences that may be difficult to undo. Still, for all its faults, Question 1 would make the income tax better than it is now, and for that reason the Globe endorses a yes vote on Question 1.


The amendment is backed by a broad coalition of labor and advocacy groups. It would not remove the flat-tax language from the constitution, as we would have wished. Instead, it would keep the existing flat tax, but add a surcharge of four percentage points for incomes over a threshold of $1 million. That threshold would rise with inflation, with the stated goal of never reaching into the pockets of middle-class families.AdvertisementSomeone earning $2,000,000 in taxable income would pay the ordinary 5 percent tax on their first million dollars, and a 9 percent tax on the second million.


The universe of taxpayers who would be affected is small: In 2019, only about 21,000 tax filers in Massachusetts had incomes over $1 million. The tax increase for that group is predicted to raise somewhere between $1 billion and $2 billion in new state revenues per year, though estimates vary widely.Voters have been told that the new money would be spent on education and transportation — and, crucially, that the funding would be added to what the state already spends in those categories. So if it passes, and those promises are kept, we should expect to see combined spending on education and transportation shoot up by up to $2 billion almost overnight.


Opponents, mainly business groups, fear the higher tax will make the state less economically competitive, driving away some employers and scaring others from coming here in the first place. They question whether a tax whose proceeds are likely to be highly volatile is a good way of funding transportation and education, which need steady, predictable funding streams. They raise the issue of “one-time millionaires,” people who are hit by the tax when selling a home or business that has appreciated in value. They question why a state that is currently running a huge budget surplus needs more revenue.


And they point out that once the tax surcharge is embedded in the constitution, changing it would be very difficult. Tax writers should be able to respond nimbly to economic circumstances. But the Massachusetts Legislature will be stuck with this unwieldy apparatus of two tax rates that must always rise and fall in tandem with each other, and must always be separated by four and exactly four percentage points. Getting rid of the amendment, if the worst-case warnings of its opponents come to pass, would require a lengthy process that can stretch out over four years.


Those are valid objections — and all the more reason why a straight-up repeal of the uniformity rule, which would take the minutiae of tax policy out of the constitution entirely, would have been preferable.


It is also the case that advocates of Yes on Question 1 are deceiving voters in one respect. Despite their insistence to the contrary, it is not possible to guarantee that the money raised by the surcharge will, in fact, be added atop the existing transportation and education budgets. There is nothing to stop legislators from shifting existing transportation and education funding into other parts of the budget, then backfilling with the proceeds of Question 1. The only recourse if the Legislature fails to spend the money as promised is political: voters would have to vote out legislators who don’t heed the voters’ will.


Frankly, though, many voters seem to understand the limitations of the amendment. They also get that it may not even be advisable to immediately plonk $2 billion into education and transportation agencies that don’t necessarily have the capacity to spend that money wisely; look how hard it’s been for the T to even spend the money it has.


The reality is that the state has plenty of needs — in education and transportation, but also other areas — that the extra money could either pay for directly, or free space in the budget for through some legislative sleight of hand. The Commonwealth has a backlog of bridges that need repair. It has notoriously high child care costs. It has a housing affordability crisis. It has a vulnerable coastline that will need costly protection against rising sea levels.


If the amendment passes, officials will certainly need to keep a careful watch for the kind of unintended consequences that critics foresee. Though the experience in other states with extra taxes on high-earners suggests fears of an exodus are overblown, it’s always possible the new tax will lead to a flight of high-earners that offsets its benefits. If the tax causes small-business owners to relocate out of Massachusetts — to avoid being hit by a one-time tax — that’s something that the state will need to counter with incentives to keep employers here.


As is often the case with ballot questions, voters on Question 1 are being asked to choose between two less-than-optimal choices. Overall, though, a yes vote would move Massachusetts a step away from the unfair income tax system created in 1915 and toward a fairer Commonwealth that’s capable of making the investments it needs.