TOP BUDGET OFFICIALS from the Legislature say they intend to abide by the will of the voters and make sure all revenue from the new millionaire tax goes to “new initiatives” in transportation and education.
Exactly what would qualify as a “new initiative” hasn’t been decided yet (is a new bus or subway car a new initiative?), nor has any decision been made on whether the money would be evenly split between education and transportation.
“That’s all to be discussed,” said Sen. Michael Rodrigues, the chair of the Senate Ways and Means Committee.
“It is our intention to uphold the will of the voters,” added Rep. Aaron Michlewitz, the chair of the House Ways and Means Committee.
One idea that seems to be gaining traction could limit how much money from the tax would be available for transportation and education in the near term.
The tax is an extra 4 percent surcharge on income over $1 million. The Department of Revenue estimates the surtax would bring in between $229 million and $265 million between now and July and between $1.445 billion to $1.766 billion in fiscal 2024, which starts July 1.
At a hearing on Tuesday to develop a consensus revenue forecast for fiscal 2024, economists gave slightly different projections for revenue from the new tax. Evan Horowitz, the executive director of the Center for State Policy Analysis at Tufts University, projected the millionaire tax would bring in $1.8 billion in calendar year 2023 but a net of only $1.3 billion because the tax will prompt some taxpayers to leave the state or take steps to avoid paying the tax, costing the state $500 million in revenue.
Given the uncertainty about the tax, Rodrigues, Horowitz, and the Massachusetts Taxpayers Foundation said they favored treating revenue from the millionaire’s tax similar to the way capital gains taxes are treated.
Each year, state budget officials would set a conservative target for revenue from the 4 percent surcharge on income over $1 million and that amount would be used for budget-planning purposes. Any revenue above that amount would be set aside in a special fund and stored away for future use.
A proposal outlined by the Massachusetts Taxpayers Foundation at the hearing called for splitting the money from the surtax equally between two trust funds, one for education and one for transportation.
The foundation recommended not touching any of that money through the end of June, capping the amount that could be used in fiscal 2024 at $500 million, and maintaining a minimum balance in the trust funds going forward to protect against hard times in the future.
Horowitz proposed including $750 million to $1 billion of the millionaire tax revenue in the fiscal 2024 budget and setting any additional money aside in a “savings and stabilization plan.”
Rodrigues indicated he favored a similar approach, although he was undecided about the split between transportation and education.
“We establish a reasonable benchmark all of us can agree on and anything above that benchmark goes into a separate fund that’s reserved for the intended use of the surtax, i.e. education and transportation,” he said.