Fate of Proposed Surtax on Millionaires Could Hinge on Three Simple Words

The plan to have Massachusetts collect about $2 billion more per year through a new 4% income surtax on millionaires seems to be encumbered by an unavoidable-but-possibly-fatal vulnerability.

The weakness consists of three simple words in the initiative petition, which is moving toward a statewide vote two-and-a-half years hence: “subject to appropriation.”

That phrase lies about a third of the way down in the text, which is as follows:

“Amendment Article XLIV of the Massachusetts Constitution is hereby amended by adding the following paragraph at the end thereof: 

“To provide the resources for quality public education and affordable public colleges and universities, and for the repair and maintenance of roads, bridges and public transportation, all revenues received in accordance with this paragraph shall be expended, subject to appropriation, [bold faced added] only for these purposes. In addition to the taxes on income otherwise authorized under this Article, there shall be an additional tax of 4 percent on that portion of annual taxable income in excess of $1,000,000 (one million dollars) reported on any return related to those taxes.  To ensure that this additional tax continues to apply only to the commonwealth’s highest income residents, this $1,000,000 (one million dollar) income level shall be adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets.  This paragraph shall apply to all tax years beginning on or after January 1, 2019.”

In the Massachusetts constitution, it clearly states that initiative petitions cannot mandate “specific appropriations” from the state treasury.

To get around that prohibition, surtax proponents had no choice but to respect the prerogatives of the legislature by inserting into the measure “subject to appropriation.”

When a thing is “subject to appropriation,” it means a majority in both houses of the legislature must vote affirmatively every year to spend money on it.

So, in the case of income surtax revenue, there’ll be no conveyor belt automatically transferring the funds to the Department of Education and the Department of Transportation for as long as the surtax is on the books. Instead, the legislature would have to authorize every year, through multiple individual votes, the expenditure of surtax dollars on specific education and transportation items.  And the governor would have the opportunity to veto any item.

While polls have indicated that up to 70% of Massachusetts voters now favor the income surtax, that support is likely to erode when the campaign to approve the surtax referendum gets underway and opponents start driving home the point that the legislature will have the legal option of spending this new revenue on things unrelated to education and transportation.

Surtax proponents will have to present a complex case for improving public education at all levels and strategically addressing a confusing array of neglected transportation infrastructure needs across the state, while persuasively articulating why both objectives need to be attained simultaneously in order to ensure the long-term strength of our economy and a thriving, growing middle class. 

Opponents, on the other hand, will have the luxury of delivering a simple message over and over again: “If you give the legislature an extra $2 billion, do you really believe they’ll do the right thing?” 

Meeting in a joint session last week, the legislature voted 135 to 57 to place the millionaire surtax on the ballot.  If the legislature takes a similar vote next year – and last week’s margin of approval suggests it will -- the measure will be put before voters statewide in November, 2018.