Surtax Opponents Warn Against Beacon Hill “Blank Check”

“Let me tell you how it will be
There’s one for you, nineteen for me
Cos I’m the taxman, yeah, I’m the taxman

Should five per cent appear too small
Be thankful I don’t take it all . . .

-- The Beatles, 1965

Opponents of the proposed surtax on household income over $1 million launched their campaign Monday morning to defeat the Constitutional amendment on November's ballot, focusing on the potential impact on small businesses and retirees as well as the possibility that the Legislature treats the estimated $1.3 billion in annual surtax revenue as a "blank check."

The Coalition to Stop the Tax Hike Amendment, a group of small businesses, chambers of commerce, some of the state's most influential trade organizations, retirees and concerned citizens, formally kicked off its anti-surtax efforts and said its members have "united to communicate to voters the damage this massive tax increase will have on our state's economy."

"Proponents of the amendment claim that it will raise taxes only on Massachusetts' highest earners, but in practice, it will harm hardworking families across the state," Dan Cence, a veteran lobbyist and political strategist and spokesperson for the Coalition to Stop the Tax Hike Amendment, said. "Massachusetts already has a budget surplus of billions of dollars. We must work together to strengthen our economy and ensure Massachusetts remains a place where small business owners can thrive."

Massachusetts voters will be asked in November whether the Massachusetts Constitution should be amended to impose a new 4 percent surtax on annual household income in excess of $1 million to raise money for education and transportation. The change is proposed as a Constitutional amendment because the state Constitution currently requires that a tax on income be applied evenly to all residents.

If the surtax is approved, the first $1 million of household income would still be taxed at the current 5 percent rate and all household income above and beyond that first $1 million would be taxed at an effective rate of 9 percent. Estimates put the annual revenue that could be generated by the surtax at about $1.3 billion and supporters pitch the idea as a way to provide a sustainable revenue source for education and transportation without dipping further into the pockets of most residents.

But the Coalition to Stop the Tax Hike Amendment and other opponents have repeatedly highlighted how the so-called millionaire's tax could affect people who might not typically be thought of as millionaires, like small business owners that file as pass-through entities for tax purposes or people who plan to sell their company to support their own retirement.

On its new website www.StopTheMATaxHike.com, the coalition links to fact sheets targeted at two particular industries -- real estate and construction -- with reasons those fields should oppose the surtax ballot question.

"The Tax Hike Amendment is not just a tax on people making a million dollars a year. It will also tax the nest eggs of longtime homeowners and small business owners whose retirement depends on their investments," the coalition wrote on the fact sheets. "That is because, unlike federal taxes, this amendment would treat one-time gains from selling a home or business as regular income, pushing many retirees and small business owners into the new higher tax bracket, and nearly doubling their taxes."

Supporters of the surtax have said that concerns about its effects on small business sales are overblown, pointing to a March analysis from the left-leaning Massachusetts Budget and Policy Center that said taxes would only be due on the capital gain -- the increase in value over time -- rather than the total price.

Rep. Jim O'Day, the House sponsor of the proposed Constitutional amendment, last June rejected opponents' claims that the surtax would unduly harm small businesses in the Bay State by asserting that "businesses earning over a million dollars, in my estimation, are not small businesses."

In its launch Monday, the coalition also called attention to the fact that while the amendment itself would require the surtax revenue to be spent on transportation and education, it would not necessarily lead to actual increases in spending on transportation and education because future Legislatures could stop appropriating money from other revenue sources to those areas.

"As the former head of the MBTA, I know there is zero guarantee that the money raised from this amendment will increase education and transportation spending. Due to a loophole in the amendment, 'subject to appropriation' means legislators can take this money and use it for their own pet projects -- it means giving Beacon Hill a blank check with no accountability," Brian Shortsleeve, a former general manager at the T who has since founded M33 Growth, said.

Lisa Alcock, a former public school teacher, echoed the same sentiment in her comments on the coalition's website. She said the amendment is "deceptive" and that "the politicians who put this on the ballot are giving themselves a blank check to redirect existing funding for education and transportation to their own pet projects, with no accountability."

Worcester City Councilor At-Large Khrystian King addressed that line of criticism earlier this month when the Fair Share for Massachusetts campaign officially launched its pro-surtax effort.

"We know that the devil's in the details in how the money will be used, we acknowledge that," he said.

A Fair Share for Massachusetts spokesman said the language of the amendment is "an ironclad dedication that the funds raised by this amendment must be spent on those two areas" and that the campaign feels confident that the Legislature -- which last summer voted 159-41 to put the question to voters -- intends to increase spending on transportation and education.

The Massachusetts High Technology Council, which was successful in getting the 2018 version of the surtax amendment tossed off the ballot, is leading a legal effort to influence how the surtax question could be described to voters when they get their ballot with a particular emphasis on the potential that education and transportation spending is not increased despite the surtax - decisions on spending are made by the Legislature, which experiences turnover every two years.

The Supreme Judicial Court this month heard arguments related to the complaint that the surtax summary that Attorney General Maura Healey has prepared for voters will mislead them.

The suit seeks to have the SJC order that ballot materials tell voters that "the Legislature could choose to reduce funding on education and transportation from other sources and replace it with the new surtax revenue because the proposed amendment does not require otherwise."

The Coalition to Stop the Tax Hike Amendment is made up of: 126 Self Storage, Associated Industries of Massachusetts, AlerisLife Inc., Ballast Lane Applications LLC, Boston Sword and Tuna, Brandon Landscaping, David Kindred Homes Inc., Diversified Healthcare Trust, EFR Mechanical, IBC Corporation, Industrial Logistics Properties Trust, M33 Growth, MA High Tech Council, MA Seafood Collaborative, National Federation of Independent Businesses, Norfolk & Dedham Group, North Central MA Chamber of Commerce, Office Properties Income Trust, Optikos, Pioneer Institute, PR Restaurants, Retailers Association of Massachusetts, Service Properties Trust, Seven Hills Realty Trust, Sonesta International Hotels Corporation, Springfield Chamber of Commerce, The RMR Group, TravelCenters of America Inc., Trudeau Construction, Western MA Economic Development Council, and Westside Finishing Co.

--State House News Service