First of Two Constitutional Conventions on Millionaire Surtax Was a Doozy

It was one of the more fascinating events to occur at the State House in a long time, this joint session on Wednesday afternoon, May 18, of the House of Representatives and Senate, or constitutional convention as it’s called when both branches meet in the House chamber to consider amending the constitution of the Commonwealth of Massachusetts.

The question before the convention was whether to advance an initiative petition that would bring about an amendment imposing a 4% surtax on annual household incomes of $1 million or more.  This new tax would be in addition to the existing 5.1% flat income tax paid by all residents.

Enough registered voters (157,000) have signed a petition to put the surtax question on the statewide ballot in 2018. But before it can be put on the ballot, at least 50 legislators must approve the measure during constitutional conventions in two successive years.  By a vote of 135 to 57, the legislature granted the first of those two approvals on Wednesday.

It has been estimated that: (a) somewhere around 21,000 Massachusetts millionaires would be affected by the surtax, and (b) the surtax would generate as much as $1.9 billion more per year in new revenue for the state.

During the three hours the convention was in session Wednesday afternoon, there were some very passionate arguments on both sides of the issue.

Surtax proponents denigrated the existing income tax as a “regressive” system hurting those “who can least afford it,” the poor, and spoke glowingly of surtax revenue as the solution to some longstanding funding woes in transportation infrastructure and public education.

Opponents questioned the constitutionality of a voter-mandated surtax because, as Senate Minority Leader Bruce Tarr averred, “Article 48 (of the constitution) provides the exclusive prerogative to appropriate funds to the legislature,” and warned of a likely exodus of the wealthy from Massachusetts if the surtax were adopted.

“In our constitution, referendums cannot earmark appropriations,” thundered Geoff Diehl, a Republican rep from Whitman.  “Make no mistake, the General Court (legislature) will be free to spend this as they wish.  This is nothing more than a bait-and-switch to open up tax rates for different income levels…Keeping the money you earn is a fundamental right in America and that argument began right here in Boston before this country was founded.”

Rep. David M. Nangle, a Democrat from Lowell, wasn’t buying what a lot of his Democratic colleagues were selling with the surtax referendum.  “It’s the introduction of class warfare: Tax the rich. Higher ed will become affordable!” he said.  “But I want to say the $2 billion would need to be a magic dust because, to cover all this spending (cited by referendum proponents), it will not be enough.  If it did come to pass, we’d be sitting here in five years having the same discussion: How do we get more revenue?”

Said Nangle, “There’s something wrong with the dialogue:  It’s stealing from the rich to give to the poor.  We are legislators.  We are not Robin Hood.  We’re shirking our responsibilities.  I hope the question does not pass.”

Nangle was one of 17 Democrats in the lower branch who voted against advancing the surtax.  The House Dems in opposition also included, most prominently, Majority Leader Ronald D. Mariano of Quincy, and the following:

Brian M. Ashe of Longmeadow, John V. Fernandes of Milford, Ann-Margaret Ferrante of Gloucester, Michael J. Finn of West Springfield, William C. Galvin of Canton, Colleen M. Garry of Dracut, Thomas A. Golden, Jr., of Lowell, Dannielle W. Gregoire of Marlborough, Christopher M. Markey of Dartmouth, James R. Miceli of Wilmington, Thomas M. Petrolati of Ludlow, Angelo J. Puopolo, Jr., of Springfield, Dennis A. Rosa of Leominster, John C. Velis of Westfield and Jonathan D. Zlotnik of Gardner.

The above 17 comprise more than 13% of House Democrats.

By contrast, only two Democrat Senators, Jennifer L. Flanagan of Leominster and Anne M. Gobi of Spencer, voted not to move ahead with the surtax.  There were seven votes in all against the measure in the 40-member Senate delegation to the convention.

Senator Karen E. Spilka of Framingham, the Democrat who chairs the key budget-shaping committee, Ways and Means, made a detailed case for the surtax.  “The (convention) conversation is more important than ever as you hear stories of how the middle class and working families are falling behind while top earners feel no or little pain," she said. "This isn’t just in Massachusetts.  It’s across the nation and part of our presidential campaign.  The argument proponents put forth is that high earners, who are the biggest winners in the economy, have the ability to pay more for the investments we need to make.  We must invest in our children’s education and our (transportation) infrastructure.”

Spilka continued:

“I’ve argued time and again that nothing is more important than the quality of our education system, which needs to keep up with the rapidly changing world.  All students need a well-rounded education, and we need to reinvest in these programs now.  We also need to invest in a world-class public higher education system to make it affordable to middle- and working-class students.  Before 1987, a student working a minimum wage job could pay their way through UMass Amherst with no debt.  Today, the average UMass Amherst student who takes out student loans graduates with over $30,000 in debt.

“The seeds of resiliency are planted in the first five years of life, so we must invest in early education.  Income disparities are evident at nine months, and (are) larger at 24 months.  We can and must do better for our youngest children.  Our transportation network is stuck in the last century.  According to the Boston Globe, 446 bridges are considered structurally deficient. These issues are not going away.  In fact, year by year, they’re getting worse. 

“People hate taxes, we get it.  But people should also hate the idea our children may not be getting an adequate education.  They should hate the fact their loved ones may waste hours of their lives commuting and going on unsound bridges.”

One of the most salient points raised on Wednesday concerned our state’s notoriously high health care costs.  Were it not for that, we might not now be having a debate on hitting up millionaires.   Here’s a simple, scary truth:

Almost all of the growth in state revenue over the past 15 years has been eaten up by the rising cost of the MassHealth (Medicaid) program, which now covers 26 percent of the Massachusetts population and accounts for 40% of the entire state budget.

Senator Jason M. Lewis, D-Winchester, noted that, “Of the growth in the state revenue since 2001, most has been consumed by rising health care, so it has not been available for many other needs.”

While annual allocations for health care have only ever gotten larger, the dollars for other priorities have been shrinking, he said. 

“Since 2001, local aid is down by 43%, EEC (Department of Early Education and Care) is down 22%, higher ed down 20%, public health down 23%, environment 23%, mental health 8%,” Lewis said. “We have been cutting and cutting in virtually every area except health care.”

Lewis, and many other legislators, believe our state has a spending problem -- but not, as he said, “the kind that Governor Baker likes to talk about,” that is, overspending.  Rather, he said, “We don’t spend nearly enough on a range of public priorities.  This has an impact!  Our families are suffering.  Our communities are suffering. And economic growth is suffering.”

If you’re a millionaire, you've had no worries about health care costs at a personal level.  But maybe now you do.  Or maybe now you’re just realizing you do. 

The high cost of health care, and especially the high and growing cost of Medicaid, is breaking the state budget. 

If you’re a millionaire, can you really be surprised when, as a budget distorted by health care gasps and groans, your less wealthy fellow citizens (and a large majority of legislators) gaze longingly at your bank account?

NOTE: All quotations in this post have been excerpted from a State House News Service account of the May 18, 2016, constitutional convention at the Massachusetts State House.