Years in the Making, Millionaire’s Surtax Passes

Immigrant License Law Survives Repeal Effort

NOV. 9, 2022…..In some of the closest statewide races this election season, the final results for all but one of Massachusetts’ four ballot questions rolled in at a nail-biting pace the day after Election Day.

Results that came in Wednesday afternoon showed that Massachusetts voters supported high-profile initiatives to levy a surtax on the state’s highest earners and to allow undocumented immigrants to obtain driver’s licenses. And over 70 percent of voters cast their ballots in favor of dental insurer restrictions, in a contest that the Associated Press called Tuesday night.

The only ballot question voters rejected this year would have changed the state’s liquor license laws. It sought to increase the number of alcohol licenses a single company could hold, allowing more stores to sell beer and wine, while gradually reducing the number of licenses specifically allowing the sale of all alcoholic beverages including liquor.

Committees for and against the four questions spent a total of more than $63.6 million this election cycle plus another $2.1 million from Total Wine & More, which did not go through a campaign committee in opposition to the alcohol licensing question. Of the total expenditures by all committees this cycle, about 65 percent was spent by the Yes on 1 and No on 1 campaigns.

Question 1, the so-called millionaire’s tax, passed by a close margin to amend the state Constitution for the first time in 22 years. It adds a 4 percent surtax on top of the state’s 5 percent flat tax for the portion of annual household income that exceeds $1 million.

The AP called the race around 1:30 p.m. Wednesday with 52 percent of voters in favor of the initiative and 48 percent against.

The surtax will raise an estimated $1.3 billion a year intended for transportation and public education.

“On Tuesday, Massachusetts voters seized a once-in-a-generation opportunity that was years in the making,” Jeron Mariani, campaign manager for the “yes” camp Fair Share for Massachusetts, said. “We’ve done what some thought was impossible: passed the Fair Share Amendment to create a permanently fairer tax system and deliver billions of dollars in new revenue for our public schools, colleges, roads, bridges, and transit systems.”

The Coalition to Stop the Tax Hike Amendment spokesperson Dan Cence said the opposition campaign was “disappointed” by the initiative’s passage, calling it a “setback for the Massachusetts economy.”

“There is no guarantee that this ill-conceived amendment will increase spending for either education nor transportation,” he said. “It will, however, severely impact retirees, homeowners, and hardworking residents across the state. This amendment will hurt small businesses as they struggle with inflation, supply chain issues, and work to rebuild from the negative impacts of the pandemic.”

Opponents to the ballot question have argued throughout this election cycle that the additional state tax revenue is not certain to actually be spent on education and transportation since it is subject to legislative appropriation.

Though the question’s passage will change the Constitution, which hasn’t happened in Massachusetts since 2000, it won’t give the Legislature a free pass to impose income tax rate changes on other levels of income.

The Constitution’s requirement that income tax be levied at a single rate remains, and Question 1 will just add the four percent surtax — and only the four percent surtax — as an exception. Any other exceptions would have to go through the same multi-year Constitutional amendment process.

“Because the proposed tax would be written into the Constitution, it does not give the Legislature the ability to introduce additional brackets without going back to the voters at least once more for that authority,” the Massachusetts Tax Foundation’s report on the question in September said.

The amendment added to the Constitution adds that the $1 million threshold will be adjusted annually for inflation to “ensure that this additional tax continues to apply only to the commonwealth’s highest income taxpayers.”

The so-called millionaire’s tax was first introduced in 2015, though the Boston Globe reported Wednesday that the first attempt to undo the state’s flat rate income tax was in 1962. Advocates battled for the 4 percent surtax for three years until it was shot down by the Supreme Judicial Court in 2018 before it could make it onto the ballot. The Legislature passed the Constitutional amendment again in 2019 and 2021 to put the question to voters on Tuesday.

The initiative passed comfortably in the metro Boston area and Pioneer Valley, with liberal strongholds of Somerville and Northampton coming in at 79 percent and 82 percent in favor, respectively.

In the wealthy town of Wellesley, where the median household income is $213,684, Democratic candidate for governor Maura Healey led over Republican Geoff Diehl by a 44 point margin but only 37 percent of voters favored the surtax.

The question also did well in Western Massachusetts, with vote shares as high as 75 percent in favor in Williamstown and 76 percent in Great Barrington.

Supporters and opponents of the ballot measure released statements throughout the day Wednesday. The Massachusetts High Technology Council, which invested in the No on 1 campaign and has led anti-surtax efforts for years, said voters were “caught in a tax trap and misled into voting for a permanent new tax.”

“As Massachusetts residents and businesses prepare for a likely global recession in 2023, our economic prospects will be handicapped by the fallout of a Constitutional Amendment that is detrimental to our business climate and harmful to the state’s already fragile post-COVID competitive position,” President Christopher Anderson said.

Associated Industries of Massachusetts also released a statement that Question 1 would have a “negative impact” on “small businesses and the economy as a whole.”

“The proposal will have an immediate effect on businesses organized as pass-through entities,” AIM said. “These companies — many of them small, family businesses that invest profits back into their businesses to grow and expand — will be punished for their success with higher taxes. This will prevent businesses from being able to buy machinery and equipment and provide competitive pay increases for employees at a time of heightened economic uncertainty.”

The American Federation of Teachers of Massachusetts, however, was enthusiastic about the question’s passage. The Massachusetts Teachers Association spent more than $10 million to support the surtax.

“Starting next year, Massachusetts will have a fairer tax system and substantial new revenue to invest in our public schools, colleges, and transportation systems,” AFT Massachusetts President Beth Kontos said. “Years from now, our communities will continue to see the benefits of better schools, safer roads, and a tax system that asks those at the very top to do their part.

Another high profile measure, Question 4 to repeal a new law that will allow undocumented immigrants to obtain licenses, was called around noon on Wednesday.

With 95 percent reporting Wednesday afternoon, 54 percent of voters were in favor of upholding the law that will go into effect next July. It allows Massachusetts residents who cannot provide proof of lawful presence in the U.S. to obtain a standard driver’s license or learner’s permit, if they meet all other qualifications.

“The passage of this law made history, and voters in Massachusetts have just made it again,” said 32BJ SEIU Executive Vice-President Roxana Rivera and Brazilian Worker Center Executive Director Lenita Reason, co-chairs of the Yes On 4 for Safer Roads campaign. “Our Commonwealth will now have safer roads, and our immigrant families will safely be able to drive to work, drop their kids off at school, and go to medical appointments. We built a strong and diverse coalition that fought back against division and drove Massachusetts forward.”

Question 4 came about as a grassroots effort of those opposed to the law to repeal it via this fall’s ballot after the law was passed over a gubernatorial veto. The “yes” vote now allows the law to proceed to full implementation starting on July 1 next year.

“Massachusetts voters have reaffirmed our Commonwealth as a welcoming place that defends dignity and equity for all by voting Yes on 4,” said Carol Rose, executive director of the ACLU of Massachusetts. “Tonight, we sent a message to the entire country: At a time when fundamental freedoms are being threatened nationally, we absolutely must preserve the protections we have secured at the state level.”

Though voters did not have to wait until Wednesday to hear the results of Question 2, which will add new regulations on dental insurer spending, supporter Joseph Casale still reported being “ecstatic” on Wednesday afternoon.

The Yes on 2 campaign released a press release around 11 p.m. Tuesday claiming a “decisive, landmark victory” for the initiative, which requires companies to spend at least 83 percent of premiums on member dental expenses and quality improvements, instead of administrative expenses. Supporters said throughout the campaign that it would implement a medical loss ratio system similar to the one currently in place for medical insurers.

“Together, we put patients first over profits,” Meredith Bailey, president of the Massachusetts Dental Society, said in a statement Tuesday night. “Dental patients deserve the same consumer protections as medical patients, and we are hopeful that the better dental benefits that the people of Massachusetts will soon experience will spread to patients across the country.”

The question’s passage makes Massachusetts the first state in the country to impose a minimum spending requirement on dental insurance companies, said Dr. Mouhab Rizkallah, author of Question 2 speaking on behalf of the “yes” campaign, Wednesday.

“By adopting Question 2, Massachusetts voters have started a national revolution dubbed ‘The Boston Teeth Party,’” Rizkallah said. “The Question 2 victory will now ricochet to every state in the country, and hundreds of millions of patients will have Massachusetts voters to thank for their improved oral health.”

The campaign against the initiative, the Committee to Protect Access to Quality Dental Care, said they were disappointed.

“While we are disappointed with the outcome of the election, we are committed to working with regulators, lawmakers and other stakeholders to protect families and businesses from the potential consequences of this ballot question that could lead to higher costs and less access to dental care,” the committee released in a statement.

The AP called Question 3 relating to liquor licenses Wednesday morning around 9:45 a.m. with 55 percent of voters seeking to keep the law as is, the only ballot question that didn’t pass this year.

The question would have doubled the combined number of licenses supermarkets and convenience stores could hold, gradually raising the license threshold from nine to 12 licenses in 2023, to 15 in 2027 and eventually to 18 by 2031.

It also could have required retailers to accept customers’ out-of-state identification to purchase alcohol and prevented its sale at self-checkout stations.

The coalition in support of the ballot question released a statement Tuesday night that said Question 3 was an attempt at a compromise between “well financed corporate chains” and locally owned package stores, markets and convenience stores.

“Question 3 was a grassroots effort led by locally owned stores across the state,” said Rob Mellion, executive director of the Massachusetts Package Stores Association. “Now all efforts by MassPack and locally owned stores must again be directed to defense against unrepentant corporate interests and their surrogate trade associations as a flood of deregulatory legislation can be anticipated in the 2023-2024 legislative session.”

Mellion added that the group of locally owned stores would “prevail and regroup.”