Top Massachusetts business leaders and retailer advocacy organizations fiercely condemned Ballot Question 1 during a virtual press conference Wednesday, arguing the so-called Fair Share Amendment or millionaires tax could weaken the commonwealth’s competitive edge and disproportionately harm owners of mom and pop shops.
Ballot Question 1 would impose a 4% surtax on all income exceeding $1 million, with the Massachusetts Legislature tasked with appropriating the new pot of money to education and transportation spending. Supporters of the referendum, which would translate into a constitutional amendment, say the tax forces of the state’s wealthiest residents to pay their fair share, while redirecting money to vulnerable communities and infrastructure needs.
Yet opponents — including the Coalition to Stop the Tax Hike Amendment, which organized the press conference — claim the tax could be detrimental and erode people’s nest eggs when triggered by one-time earnings, such as the sale of homes or small businesses.
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Jim Rooney, president and CEO of the Greater Boston Chamber of Commerce, warned Ballot Question 1 could spur long-term negative consequences for the state’s business ecosystem and drive talent elsewhere. That’s in the context of an out-migration among residents and businesses already underway here, Rooney said, particularly as cities and states are “openly competing for talent, for firms, for business units.”
“If this passes and we become less competitive further, would a start-up like DraftKings happen in Massachusetts, or might they decide, ‘You know what, the advantages of the tax structure and so forth in another state is more conducive to attracting the talent and doing the work that I want to do,’” Rooney said. “This is, in addition to having immediate impact, is a real slippery slope to our competitiveness, our ability to attract and retain talent, and create jobs.”
Andrew Farnitano, a spokesman for Yes on 1 campaign, agrees in a statement that the ballot question is critical to bolstering schools and roads without levying more taxes on middle-class Bay Staters.
“Right now, the richest 1 percent pay less of their income in state and local taxes than the rest of us do! Voters understand that the ultra-wealthy aren’t paying their fair share,” Farnitano said in a statement. “The corporate lobbyists who oppose Question 1 agree that we need greater investments in transportation and public education. They’d just rather have the rest of us pay for it, instead of asking multi-millionaires and billionaires to do their part.”
But during the press conference, Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, said the structure of Ballot Question 1, which requires a constitutional amendment to take effect, is “really problematic.”
Should unexpected adverse economic consequences arise from the surtax, McAnneny lamented constitutional adjustments would take a minimum of four years to rectify. But some risks are clear now, she said.
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“The Massachusetts economy is in a period of transition; we know we’re against a backdrop of high inflation, we have labor shortages, an uptick of remote work and employers, and employees have more options of where to locate than ever before, and they’re more attuned, I think, to the relative cost differences,” McAnneny said. “Given that people have this newfound flexibility, adding a tax burden onto small businesses, to investors and to entrepreneurs who are the drivers of the Massachusetts economy, it’s not a good idea — particularly when Massachusetts has ample resources at its disposal.”
Christopher Carlozzi, the Massachusetts state director of the National Federation of Independent Business, likewise cautioned Ballot Question 1 will stunt economic vibrancy in the commonwealth.
“If Question 1 passes, Massachusetts will lost its flat tax, which is an economic incentive for these businesses,” Carlozzi said. “It encourages entrepreneurs to grow and start businesses in Massachusetts, and we’d be losing them.”
Carlozzi said the referendum will also stymie small businesses, many of which are still grappling from the financial shockwaves of the COVID-19 pandemic, by potentially imposing a new tax on owners whose property, facilities and equipment “adds up pretty quickly and can easily exceed $1 million.”
That’s unfair to small business owners who may need to reconsider their retirement plans, he said.
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“Question 1 risks curbing growth and expansion for some small businesses, while telling others, business owners who have invested a lifetime in Massachusetts — who have poured time, energy and capital into their business — that when they retire, we’re going to tax them at a higher rate. These are businesses that have been part of the community for years, and their thank you will be a higher tax rate when they retire.”
Still, a report released Monday from the left-leaning Massachusetts Budget and Policy Center claimed otherwise, positing that it is “very unlikely” small business owners would be subject to the surtax when they sell their businesses. Within a roughly six-year data set, culled from BizBuySell.com, an average of only 21 small businesses sold annually netted prices above $1 million, according to the report.
“But even for the owners who do manage to sell their business for more than $1 million, this does not mean they would inevitably owe any Fair Share tax,” the report states. “Many costs are deducted from the sales price when determining the resulting ‘net gain’ or taxable income — and it is only a filer’s taxable income above $1 million that is subject to the Fair Share tax…A typical business would have to sell for much more than $1 million in order for the sale to result in taxable income above $1 million.”