Today the Massachusetts Supreme Judicial Court handed down a decision with huge financial consequences. It ruled unconstitutional a ballot proposal to impose a surtax on incomes over $1 million to be used for education and transportation. Polling on this proposition indicated that it was very likely to pass on the November 2018 ballot. So, in effect, the SJC blocked the surtax and the many spending proposals based on the surtax.
Under the Massachusetts constitution, the state income tax must be flat — it must apply the same rate regardless of income level. This is in contrast to the federal income tax which is progressive — at higher income levels the federal income tax rate is higher.
To raise more money for public purposes and to serve a sense of justice, there have been repeated attempts to amend the state constitution to allow for progressive income taxation. In the current effort, the proposition was framed as follows:
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, 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. . . .
The proposition effectively combines three ideas:
- Adding a 4% surcharge on incomes over $1 million.
- Dedicating funds to transportation.
- Dedicating funds to education.
I supported this proposition . Like the drafters of the proposal, I felt that the combination would be appealing to a broad constituency, and, in fact, it was. As of the end of last month, 77% of voters had a positive view of it.
The SJC’s concern
The proposition was brought forth as an initiative petition. Article 48 of the constitution, adopted 100 years ago, governs the submission of ballot questions to the people by initiative petition. The initiative process under Article 48 operates within fairly strict boundaries. For example, a petition cannot impair basic civil rights or make specific appropriations of funds. Additionally, Article 48 requires that propositions include subjects “which are related or which are mutually dependent.”
The SJC concluded that the three parts of the question were not adequately “related.” At first blush, this seems like an extremely abstract consideration. Indeed, the court’s opinion devotes a lengthy paragraph replete with citations to the meaning of the word “or”. At a more practical level, the court explained that “a voter, unlike a legislator, has no opportunity to modify, amend, or negotiate the sections of law proposed by popular initiative.” Voters should not be put in the position of voting for a package in which they like some things but not others.
While I’m deeply disappointed with the court’s decision, I understand the point that the court makes. Voters could react differently to the three ideas in the proposal. Some voters might be enthusiastic about raising income taxes on the wealthy for justice reasons, but might want to apply the proceeds to reducing other taxes or to providing higher earned income tax credits for low earners. Some voters might want to spend more on education, but not so much on transportation. Right or wrong, the majority opinion of the court is the last word.
It has been estimated that the proposition would have raised $2 billion per year — a game changing sum in a $40 billion budget. The initiative process is a four year cycle. For the past couple of years, I personally have frequently embraced the proposition as the most realistic way to meet unmet needs for education and transportation. For now, we are going to have to live within our limited means. We may be able to identify alternative funding sources, but the prospect of a progressive state income tax is once again far in the improbable future.