Court Judging Fairness Of Income Surtax Summary

Alcohol, Gig Worker Ballot Questions Face “Relatedness” Challenges

MAY 4, 2022…..The justices of the Supreme Judicial Court waded Wednesday into the fray over three issues that are on track to go before voters on the November ballot: the long-debated surtax on households that earn more than $1 million, a proposal to shape the classification of gig economy workers like Uber drivers and the latest bid to reshape the state’s alcohol licensing structure.

Anderson v. Attorney General

The first case on the docket Wednesday dealt with the information voters will get on the November ballot about how revenue from the proposed surtax on household income over $1 million could be spent. The justices paid close attention to the phrase “subject to appropriation” and whether voters will understand that that means state lawmakers retain ultimate spending authority.

Having successfully kept the so-called millionaire’s tax off the ballot in 2018, Massachusetts High Tech Council President Chris Anderson and a group of state representatives and right-leaning groups lodged a complaint that the surtax summary that Attorney General Maura Healey has prepared for voters will misguide them and could lead to “the nightmare scenario of the Constitution being amended based not on the will of the people, but because the people were misled.”

Healey’s summary reads: “This proposed constitutional amendment would establish an additional 4% state income tax on that portion of annual taxable income in excess of $1 million. This income level would be adjusted annually, by the same method used for federal income-tax brackets, to reflect increases in the cost of living. Revenues from this tax would be used, subject to appropriation by the state Legislature, for public education, public colleges and universities; and for the repair and maintenance of roads, bridges, and public transportation. The proposed amendment would apply to tax years beginning on or after January 1, 2023.”

The suit seeks to have the SJC order that ballot materials tell voters that “the Legislature could choose to reduce funding on education and transportation from other sources and replace it with the new surtax revenue because the proposed amendment does not require otherwise” and order that Healey and Secretary of State William Galvin not put the question on the 2022 ballot without the added proviso.

“Subject to appropriation indicates that the 4 percent monies that are raised may not be used, may not be spent, right? That indicates that … this could pass and we wouldn’t have the 4 percent actually appropriated, right?” Justice Scott Kafker asked less than two minutes into the presentation from the plaintiffs’ attorney, Kevin Martin.

Martin agreed that the language would indicate to a reasonable voter that the money raised might not be appropriated at all, but said that “what it would not indicate to a reasonable voter, when put into a Constitutional amendment, is that the Legislature actually can spend it however it wants.”

Kafker responded, “I mean, that’s the entire appropriation process, right? That the Legislature can do what it wants with the money, right?”

The proposal would shift the state away from the flat income tax rate structure enshrined in the Massachusetts Constitution. If the amendment is approved by voters, the first $1 million of household income would still be taxed at the current 5 percent tax rate and household income above that first $1 million would be taxed at an effective rate of 9 percent.

Justice David Lowy took note during Wednesday’s oral arguments of the significance of voters being asked to amend the Massachusetts Constitution rather than an individual law passed by the Legislature.

“The stakes are a lot higher when we’re dealing with Constitutional as opposed to statutory,” he said.

The language of the surtax amendment itself says it is meant 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” and requires that “all revenues received in accordance with this paragraph shall be expended, subject to appropriation, only for these purposes.”

The suit addresses one of the opponents’ main arguments — that the money raised by the surtax would not necessarily be used for transportation and education and that it may not result in actual increases in spending in those areas — and argues that Healey’s summary of the question and description of what a ‘yes’ vote would do misleads voters in that regard.

When Assistant Attorney General Robert Toone presented on behalf of Healey’s office, he argued that the phrase “subject to appropriation” does alert voters that spending is contingent upon future legislative action and said the court has “always held” that it was sufficient notice to voters.

“What if we were concerned that just subject to appropriation is inside baseball language?” Lowy asked. He asked Toone whether letting voters know in the summary that the Legislature retains the ability to enhance or reduce funding within budget categories would help.

Toone replied, “I think it would be more confusing and potentially misleading than helpful.”

While Lowy seemed to suggest some additional summary language about the Legislature’s ultimate appropriating power may be within bounds, he also told Martin directly that “what you want to add is one-sided.”

“Your proposal is not to add to the summary that the Legislature retains the ability to enhance or reduce funding in budget categories. Arguably, that’s neutral. You’ve got an enormous amount of advocacy — which is fine within the fulsomeness of a political debate — but not in a concise summary, when you only need to make sure that you avoid confusion,” Lowy said.

Martin responded by telling the justice that the attorney general’s summary and ‘yes’ vote statement suggest to voters that the money is to be used for only two purposes, “our proposal is that voters be made aware that the money actually could be spent on other purposes in addition to those two.”

Gov. Charlie Baker, who has been critical of the income surtax and whose budget chief called it “dangerous policy,” nominated all seven of the high court’s seven justices. Healey supports the surtax and is running for governor this year, leading that race in public opinion polls.

The surtax would add about $1.3 billion in annual revenue for the state, according to a report published this year by the Center for State Policy Analysis at Tufts University, revenues that would be worked into an annual state budget that is approaching $50 billion.

El Koussa & others v. Attorney General and Colpack & others v. Attorney General

The SJC also tackled suits Wednesday that argue that two other questions on track for the 2022 ballot — one involving the status and benefits for app-based drivers, and the other that would overhaul liquor-licensing rules — improperly mix unrelated subjects.

The state Constitution allows initiative petitions to contain only subjects that are “related to or mutually dependent on each other,” and improperly mixing two different spending priorities and a major change in tax policy is what the SJC pointed to when it tossed the 2018 version of the income surtax amendment off that year’s ballot. The petition is not subject to the same restriction this time around because it was filed by state lawmakers rather than citizens.

In the case involving gig economy drivers, the plaintiffs argue that the ballot question violates the relatedness requirement in three ways: by using guaranteed minimum compensation and benefits as unrelated “sweeteners” to induce voters into backing drivers being classified as independent contractors; by altering the state’s paid family and medical leave law; and by changing the potential liability a transportation network company would have to a member of the public injured by a driver. The justices focused most closely Wednesday on the last possibility.

Patrick Moore, an attorney for the plaintiffs, told the SJC that the initiative states that drivers “will not be considered agents for all purposes” and that the provision is meant to shield companies from vicarious liability.

“It has nothing to do with minimum compensation or benefits for the drivers and is wildly unpopular. If that were presented to voters alone, it would be rejected out of hand,” Moore said. “So what the proponents attempt to do is to put it as part and parcel of their comprehensive scheme that they’ve offered, hoping that the focus will be on [inaudible] rather than on this shield from tort liability.”

The attorney general’s office contended that “all the provisions of the petitions are germane to this purpose” of defining and regulating the contract-based relationship between network companies and app-based drivers, and Assistant Attorney General Jesse Boodoo told the court Wednesday that “we disagree with the plaintiffs’ interpretation that that language would create a so-called liability shield.”

“But even if we are wrong about that, we believe that it would not impair certification” under the relatedness requirement, Boodoo said.

Justice Dalila Argaez Wendlandt told Boodoo that “one of the issues that is persuasive is that this initiative is not just defining the relationship and rights and responsibilities as between the worker and the purported employer, but also as between the worker and rest of world.” She said she was “troubled” that an issue that large would be related to a relationship between an employer and a worker.

Kafker seemed to suggest that he thinks the two issues are unrelated.

“The public may feel one way about gig employees and how they’re compensated, whether they get all these benefits or not. But the public cares a lot about whether, if they’re in an accident with one of those people, are they limited to suing the poor guy who’s driving the car or can they sue the large corporation that can protect them and cover their damages? Those are two different policy questions,” he said.

In the final of three ballot question cases heard Wednesday, the court considered the proposal backed by the Massachusetts Package Stores Association to change to state liquor licensing laws to double the number of allowable licenses any one retailer can hold to 18 by 2031, but to reduce the cap on licenses for the sale of all alcoholic beverages — beer, wine and liquor — from nine to seven. The proposal would also put new rules in place prohibiting self-checkout of alcoholic beverages and allowing retailers to accept out-of-state IDs.

Opponents of the proposal argued that it “is a Trojan horse that combines independently popular measures that purport to modernize Massachusetts licensing laws with regressive measures that favor the narrow business interests of its proponents.”

“All told, the petition would require the electorate to cast a single vote on five competing and disparate subjects raising significant and distinct policy questions about the number of off-premises licenses a retailer may own (and where), about what regulatory burdens should be imposed on different types of retail channels (and license tiers), and about what practices should be allowed to provide greater choice and convenience for consumers,” plaintiffs wrote in their brief.

The attorney general’s office told the court in its own brief that “all this proposed law’s constituent parts drive toward its common goal. And just as this Court previously determined that a similar petition satisfied the requirements … so too does this proposed law.”