The Legislature advanced a constitutional amendment Wednesday calling for an additional tax on the state's highest earners, while skirting any discussion of replacing Massachusetts' current flat tax system with a graduated income tax.
Backers of the so-called millionaire tax say the 4% surtax on the portion of an individual's annual income that exceeds $1 million would generate up to $2 billion in revenue earmarked for investments in education and transportation. Opponents, including Republicans and several business organizations, argue the measure could put a drag on the state's booming economy.
The 147-48 vote by a joint session of the Democratic-controlled Legislature was unsurprising given the strong support shown for the millionaire tax in a procedural vote last month.
The amendment, however, still requires another favorable vote during the next two-year session of the Legislature before it can come before voters for ratification in 2022.
The state's constitution currently requires that all income be taxed at uniform rates. An earlier effort by a coalition of labor, religious and community groups to raise taxes on about 20,000 of the state's wealthiest residents was knocked off the 2018 ballot after a legal challenge.
"The Massachusetts economy is working great for those in the upper 1%, but the time is now for all residents to reap the benefits of what this great state can accomplish through the revenue of the fair share amendment," said Democratic Rep. James O'Day, using the term preferred by the measure's most ardent supporters to describe it.
O'Day, the amendment's lead House sponsor, cited two derailments on the Boston-area transit system in recent days as evidence the state needs more resources for transportation infrastructure. He also pointed to the state's educational achievement gap and long waiting lists for preschool programs in urban neighborhoods.
Rep. Brad Jones, the House Republican leader, warned against a ``bait and switch'' scenario in which millionaire tax revenue supposedly promised for education and transportation is in fact diverted for other purposes. A proposal by Jones to add language further guaranteeing the revenue is spent exclusively on education and transportation was defeated in a mostly party-line vote.
Some potential drama was avoided just prior to Wednesday's debate when a handful of lawmakers withdrew proposed language that would go far beyond the millionaire tax and remove entirely the constitutional prohibition on a graduated income tax.
Among U.S. states with income taxes, Massachusetts is one of just nine with a flat tax, while more than 30 have a graduated system that imposes higher tax rates on higher levels of income and is considered fairer by many Democrats.
No reason was immediately given for the graduated tax language being withdrawn, but legislative leaders may have been weary after several previous votes by Massachusetts residents against a graduated tax, most recently in 1994.
In a statement, Jim Lyons, chairman of the state GOP, said abolishing the flat tax would be a "blatant cash grab masquerading as class warfare."
After a lawsuit brought by several business-backed organizations, the Supreme Judicial Court last year threw out the previous version of the millionaire tax, ruling it violated restrictions placed on citizen initiatives by combining taxes and spending. Since the current proposal — though identically worded — was initiated by legislators rather than through voter petitions, legal experts say it's unlikely to face the same legal roadblock.
Opponents have now refocused their efforts on warning lawmakers that revenues could fall well short of projections if the millionaire tax causes wealthy taxpayers or business owners to leave the state.
"This constitutional amendment will hurt Massachusetts," said Rep. Marc Lombardo, a Republican who argued that high earners would become a "flight risk" if the measure became law. Critics have argued that other states, including neighboring Connecticut, witnessed such an exodus after imposing higher taxes on the wealthy.