Who is paying for all of the ads about 'millionaires tax' ballot question? What we know

Funds have been flowing freely into the coffers of supporters and opponents of the ballot questions being posed to Massachusetts voters this election season: Especially when it comes to Question 1, a constitutional amendment to raise the income tax rate for the state's highest earners.

Proponents of Question 1 have donated $24 million to see it passed. Opponents of the measure have kicked in $13 million.

The measure is expected to raise between $1.3 billion and $2.1 billion a year. The funds would be earmarked exclusively for subsidizing education and transportation; that means more money for public primary and secondary schools, more money to fix the MBTA, more money for planes, trains and buses, and for roads and bridges.

Flat tax in Massachusetts for all wage earners making $8,000 or more

Massachusetts earners are currently taxed at a flat 5%; any full-time resident earning $8,000 a year or more pays at that flat rate. Question 1 would add a 4% tax on yearly incomes above $1 million; that means the tax rate for the first million would remain at 5%, everything earned over that would be taxed at 9%.

So who’s in favor?

According to the Massachusetts Office of Campaign and Political Finance (OCPF) the biggest contributors to Yes on 1 have been the state’s teachers’ unions. The Massachusetts Teachers Association has ponied up $11,215,719 since 2020. The National Education Association comes in second, with donations totaling $7.5 million.

Opponents fear the tax would drive the state’s highest earners out of Massachusetts, force millionaires to hide their money, discourage the creation of small businesses and tax windfall profits like the sales of family homes and businesses.

Boston teachers have contributed $300,000. The American Federation of Teachers contributed $300,000, as well. Other big donors include the SEIU Local 1199, representing health care workers and Local 509, the AFL-CIO kicked in $1 million as well.

Shannon Liss-Riordan, who lost her bid for attorney general in the September Democratic primary, sent the organizers $100,000 Oct. 17. Mohamad Ali of Arlington, CEO of IDG (International Data Group), kicked in $100,000 in September.

Working against the passage of Question 1 are a handful of big guns: Rand-Whitney Containerboard, based in Connecticut, part of Patriots owner Robert Kraft's conglomerate, has forked over $1 million; James Davis, chairman of New Balance, has donated $2 million and Suffolk Construction Company, of Boston, contributed $1,010,000. Half-million dollar contributors include CrossHarbor Capital Partners, of Boston, and Phillip Gross, managing director of Adage Capital Management, of Concord.

The Edgerly family, Paul and Sandra, of Brookline, together have contributed $2 million in four chunks; he is the founder and director of VantEdge, a private equity firm, and she is listed on the website as a real estate developer.

Fox Rock Capital LLC and Fox Rock Columbia Realty have contributed about $1 million, combined. Robert Reynolds of Putnam Investments contributed $200,000, as has ABP Trust in Newton. Arthur S. Demoulas of Ten Mountain Capital, a financial services company listed in Boston, contributed $100,000.

Both sides are campaigning hard to sway voters to their cause. Proponents of Question 1 have already spent $21 million; opponents have spent $10 million.

On Tuesday, proponents of Yes on Question 1 ‒ MBTA Workers for Yes on 1, Public Transit Public Good and Riders, Workers and Commuters United for Transit Justice ‒ rallied with riders, workers, union officials and politicians to urge passage of the ballot initiative.

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Top priority for trade and teacher unions

“This is a top priority for us,” said Steven Tolman, president of the Massachusetts AFL-CIO. He called it an opportunity for the state’s wealthiest residents to invest in the future of the state. “It’s important for transportation, it’s important for public education; these are the hallmarks of a successful commonwealth.”

On Wednesday, opponents of Question 1 offered the media a glimpse of what they say could happen if the measure passes, with information provided by the president of the Greater Boston Chamber of Commerce and the Massachusetts Taxpayers Association, as well as a testimonial from a Swampscott chocolatier.

“We’ve grown the business,” said Erin Calvo-Bacci, owner and co-founder of CB Stuffer, as well as a former Republican candidate for state Senate.

Established in 2007, rebranded in 2015 as CB Stuffer, and known for peanut butter cups in many different flavors, the company has an online presence and sells wholesale and retail. The economic downturn forced Calvo-Bacci to draw back from three retail stores, sell the family home and drain retirement savings.

“Question 1 is not good for business,” Calvo-Bacci said, explaining that for many entrepreneurs who don’t have a pension or company-matched 401(k), selling a family business is the retirement plan. The proposed tax bite, she said, could prompt many to question whether to stay in Massachusetts or establish a business elsewhere.

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Proponents of Question 1 point out that home and business sales would not necessarily trigger the tax, as it only comes into play when capital gains ‒ the difference between the purchase price and sales price ‒ tops $1 million, when combined with additional income. Andrew Farnitano, a spokesman for the Yes on 1 campaign, said only 895 homes sold in Massachusetts in 2021 would have triggered the tax. Sellers are also entitled to deduct $500,000 on the sale of a primary residence and the entire cost of pre-sale renovations, closing costs and realtor commissions.

Almost 1 million Massachusetts residents ride the T daily

In urging a yes vote on Question 1, state Rep. Adrian Madaro, D-East Boston, said the funds would be a critical resource to resolve the MBTA’s safety crisis and spotty service record.

“The MBTA cannot solve this alone; it needs a sustainable funding source,” Madaro said.

The money could help the MBTA address safety and maintenance issues on the T for decades and ensure the mass transit system is reliable, affordable and safe.

“Commuting to work should not be hazardous,” Madaro said.

Numerous mishaps and accidents plagued the MBTA this year, including an entrapment and dragging that caused the death of a passenger on the Red Line, as well as a track fire on the Orange Line in July that forced the evacuation of some 200 passengers onto the bridge over the Mystic River. One woman jumped from the bridge and swam to safety.

The Federal Transit Authority conducted a review of the MBTA over the course of the spring and summer, releasing a report that found safety issues caused by deferred maintenance, lack of adequate personnel to run the system citing almost 1,000 vacancies in funded positions, as well as favoring capital projects over routine maintenance. The federal authorities also cited the massive budget cuts to the agency from 2015 through 2019 as an aggravating factor in the failure of the T.

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Almost 1 million Massachusetts residents ride the subway and bus system every day, many from low-income families.

Several riders spoke at the rally. Mitikei Chengerei of Chelsea spoke of the hours-long ordeal of getting to her job in Wakefield, lost as she tried to navigate both language difficulties (she is from Ethiopia and speaks Amharic) and unfamiliar ground.

“Despite the shuttle buses, it took me two hours to get to Wakefield from Chelsea. I was forced to take local buses, shuttle buses and to walk,” Chengerei said.

Regular T rider Li Fang Zhang, speaking in Cantonese through a translator, said she attended the rally to make sure Question 1 passes.

“Massachusetts should make improving public transportation a number-one priority,” Zhang said, adding that it would improve the economic climate and the environment as well.

Jim Evers, president of the Boston Carmen’s Union, said Massachusetts has always been a leader when it comes to mass transit; the nation’s first subway was opened in Boston in 1897.

“It’s up to us to lead again,” Evers said. "We’re asking the state’s millionaires to pay their Fair Share.”

Evers described the federal infrastructure bill as a godsend, but noted that the T needs a stable funding source if it is to be viable in the long run. Currently, 60% of the MBTA operating budget is  derived from the state sales tax.

“But the federal bill, and current funding levels are not enough to solve the MBTA issues long term,” Evers said.

High cost of living already a deterrent

Jim Rooney, president of the Greater Boston Chamber of Commerce, questioned the bona fides of the state legislature in allocating funding for education and transportation if Question 1 passes. He asked whether lawmakers would repurpose some of the funds already dedicated to education and transportation and replace those with funds generated by Question 1.

“There’s no guarantees,” Rooney said.

He also questioned whether the tax would hamper Massachusetts’ ability to attract and retain top talent in the business world. Massachusetts is already a very expensive state to live in; housing prices coupled with taxes and the cost of living already form a barrier to attracting top-tier businesses.

“Highly-skilled, and highly-compensated workers attract others,” Rooney said. “One star scientist creates 10 other jobs: His accountant, his lawyer, restaurants, support services. It’s a financial eco-system.”

Christopher Carlozzi, director of the Massachusetts Small Business Association, said 80% of the businesses in the state, even limited liability companies, are pass-through businesses. When the federal government capped local and state tax exemptions at $10,000, the state authorized a pass-through credit that allowed business owners to claim earnings as personal income.

"That's not take-home pay," Carlozzi said, characterizing the funds as money to reinvest in the business and help it grow. "This tax hike will impact them, as the vast majority of businesses are pass-through entities."

Eileen McAnneny, of the Massachusetts Taxpayers Foundation, said the state is awash in money and asked why it needs to collect more.

“If the state needs more tax revenue, there are other ways to collect it, not embed it in the Constitution,” McAnneny said. She postulated that legislators may want to repeal, revise or amend the measure if the economic impact were to be too dire. “There is no easy way to change it; it could take four years.”

Massachusetts, she said, has ample resources at its disposal; she believes the graduated tax is an unnecessary burden on its residents.

This article originally appeared on Telegram & Gazette: MA Question 1: Millionaires Tax or Fair Share who is paying for ads