MA State Rep. Kane Opposes Graduated Income Tax Plan

From the Office of Representative Hannah E. Kane:

Citing unresolved questions about the proposal’s legality and potential problems with its implementation, State Representative Hannah E. Kane (R-Shrewsbury) opposed a graduated tax plan being eyed for the 2018 state ballot during a joint session of the House and Senate today.

Representative Kane said she voted against the proposed “Millionaire Tax” due to concerns about creating a two-tiered tax system, questions about its Constitutionality, and uncertainty about how the money raised will actually be used.

“I don’t believe that this ballot initiative, which will amend the state constitution, is the appropriate or responsible way for the legislature to address funding for education and transportation infrastructure,” said Representative Hannah Kane. “Per the constitution, the revenues generated from the proposed tax increase are not able to be directed towards specific areas or needs, and the ballot initiative petition does not address this. Furthermore, as we discuss raising taxes on income over $1 million what is to stop us from increasing taxes on other tax brackets years down the road. I believe that before increasing taxes on any of our wage earners, especially by creating a new category of taxation on our highest wage earners, we need to examine our current spending practices in regard to education and transportation and ensure more effective and efficient use of funds currently available. I believe the proposal is misleading and starts us down a dangerous path.”

Massachusetts currently assesses all residents’ personal income at a uniform “flat tax” rate of 5.1 percent. The ballot proposal would amend the state Constitution by allowing Massachusetts to impose an additional tax of 4 percent on income in excess of $1 million, with the revenues generated to be used for education and transportation.

The tax measure received initial approval during today’s Constitutional Convention, where it passed on a vote of 135-57. To reach the 2018 ballot, the Millionaire Tax must again receive the support of at least 50 legislators during the 2017-2018 legislative session.

Although the state Constitution explicitly prohibits any amendment that “makes a specific appropriation of money,” the Millionaire Tax proposal attempts to circumvent this restriction by stating that the money raised would be “subject to appropriation” by the Legislature. Representative Kane noted that this language would still require revenues raised by the surtax to be placed in the General Fund, where it would be up to the Legislature to determine how this funding would be allocated.

Representative Kane noted that the funds received by Massachusetts as part of the 1998 national tobacco settlement were intended to help pay for smoking cessation and other health-related programs, but only a small portion of the money was actually used for these purposes. She expressed concern that the same thing could happen with the Millionaire Tax revenues.

Even if the Legislature appropriates the Millionaire Tax revenues for the stated purposes, there are concerns that existing money already being spent in these areas could be diverted to other programs, resulting in no net increase in spending on education or transportation. To address these concerns, Representative Kane supported an amendment offered by Republican Leadership that would have added language stipulating that any revenues generated will be used “in addition to and not in lieu of funds” that are already being appropriated for education and transportation. That amendment failed on a vote of 54-138.

Representative Kane also cited concerns about the Legislature’s failure to fully implement the 2000 statewide ballot initiative to reduce the income tax rate to 5 percent, a proposal that was supported by over 1.5 million Massachusetts voters. The initiative petition should have lowered the income tax rate to 5 percent by 2003, but instead it has taken 16 years to reduce the rate to 5.1 percent.

Republican Leadership offered a pair of amendments to reduce the income tax rate to 5 percent. Both proposals were defeated, one on a vote of 42-148 and the other on a vote of 42-147.

The Beacon Hill Institute, the Massachusetts High Technology Council and other business groups have warned that the proposed tax is anticompetitive and would have a detrimental impact on small businesses and job creation.

Between 1962 and 1994, Massachusetts voters rejected a total of five graduated income tax ballot proposals. The most recent ballot initiative, in 1994, was defeated by a margin of more than 2-1.