Oct 17, 2022 - Politics

Unpacking Massachusetts Question 1

It's almost time to vote. Photo: Mike Deehan/Axios

The local TV airwaves are filled this election season with ads telling voters how great, or dreadful, it would be to increase taxes on the highest-earning households in Massachusetts.

You've seen the pitches: A “yes” vote on Question 1 would raise over $1 billion annually for transportation projects and education funding by having those who earn over $1 million a year pay more.

  • A “no” vote would mean protecting wealthy taxpayers from lawmakers who can't be trusted to spend the money the way they say they will.

How it works: Question 1 asks whether a new 4% surtax should be applied to income over $1 million.

  • This would be on top of the existing 5% tax on all income brackets.
  • For instance, if someone earns $1.5 million in a year, the additional 4% would apply only to the $500,000 over $1 million, and they would owe another $20,000.
  • If they earn $1.01 million, the new tax would be $400. If they earn $999,999, there would be no change.

Why it matters: The proposed change to the tax code would be relatively simple, but there's a lot of uncertainty about what the impact would be.

  • A huge surge in funding for transportation and schools sounds good, but Beacon Hill lawmakers would still need to vote each year to send the newly raised funds where voters intend.
  • The wealthy could use tax-avoidance schemes that would limit the revenue raised, or even leave Massachusetts and take all of their income taxes with them.
  • Wealthy people and businesses may no longer want to move to Massachusetts because of the tax burden on the highest earners.

Details: Tufts University's Center for State Policy Analysis laid out the pros and cons of the ballot question.

  • The higher tax level would apply to only 0.6% of Mass. households. Those few households contribute one-fifth of all income taxes to the state.
  • Generating new revenue for education and transportation is popular with voters and could improve racial and economic inequality, help student outcomes and replace failing transportation systems.
  • The amount raised will be subject to the boom-and-bust cycles of the economy.

The big picture: The Boston Globe's Shirley Leung looked at what the surtax would mean for "one-time millionaires," those who don't normally earn over $1 million a year but may profit that much by selling a business, second home or investments.

  • How people vote "will come down to whether you’re a millionaire or not, and whether you know one or expect to earn $1 million in a single year," Leung wrote.

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