On June 18, 2018, the Massachusetts Supreme Judicial Court held in Christopher Anderson vs. Attorney General, that the state’s initiative petition to impose a “Millionaire’s Tax” is unconstitutional and cannot be placed on the ballot in the November 2018 statewide election.
Background
Under Article 44 of the Massachusetts Constitution, state income tax on earned income must be calculated by applying a single, flat-rate percentage, and as such, the legislature cannot impose a graduated income tax on Massachusetts personal income taxpayers.
In an effort to raise additional revenue through the income tax, the state legislature voted to advance Initiative Petition 15-17, an amendment to Article 44 that would have imposed an additional four percent surtax on annual taxable income in excess of $1 million. Initiative Petition 15-17 earmarked the additional revenue “to provide the resources for quality public education and affordable public colleges and universities, and for the repair, maintenance or roads, bridges, and public transportation.”
Under a separate provision of the Massachusetts Constitution, Article 48, and subsequent case law, an initiative petition must only contain subjects which are either related or mutually dependent.
Massachusetts Supreme Judicial Court appeal
On appeal to the Massachusetts Supreme Judicial Court, the Court concluded that Initiative Petition 15-17 combined three different subject matters contrary to the requirement of Article 48 that an initiative petition address only related or mutually dependent subjects. Accordingly, the Court found that Initiative Petition 15-17: (1) amended the flat tax rate and imposes a graduated income tax, (2) prioritized spending for public education, and (3) prioritized spending for transportation.
The Court noted that the three subjects lacked a, “relatedness among the substantive parts,” such that the Court was unable to discern a common purpose or unified public policy which could be clearly decided by voters. Further, the spending priorities for education and transportation were only related by a “public good.” Finally, the Court found that the earmarks were entirely separate from the creation of a stepped, rather than flat, tax.
The Court decided that as written, Initiative Petition 15-17 was not in compliance with the requirements of article 48 of the Massachusetts Constitution, and could not be placed on the ballot in the 2018 statewide election.
Implications
As the ballot initiative cannot be placed on the November 2018 ballot as drafted, Massachusetts personal income tax rates for earned income will continue to be imposed at a flat rate, currently 5.1 percent for the 2018 tax year, regardless of the individual’s level of income. A similar initiative would likely not make it to a ballot in the near future as a constitutional amendment must first receive at least 25 percent of two consecutive constitutional conventions, before submission to the voters. Additionally, past attempts to amend the constitution in order to adopt a graduated personal income tax have failed at the ballot box. As such, any changes to the personal income tax rates for earned income imposed by the Massachusetts legislature will continue to be a flat rate across all levels of income.
