In midterm elections, voters in Massachusetts and California will decide whether millionaires should pay more taxes


By Andrew Keshner

Should millionaires be taxed more to help pay for large-scale infrastructure projects and electric vehicle purchases? Voters in two states will decide Nov. 8

With midterm elections approaching, where costs are a priority for many, voters in Massachusetts and California are being asked to decide whether their states’ millionaires should tax more to help pay for public goals in scale such as infrastructure improvements and widespread purchases of electric vehicles.

A “yes” vote in Question 1 from Massachusetts would add a 4% surtax for households earning at least $1 million. The Bay State has long had a flat income tax, now at 5%. The money would be tied to spending on education and infrastructure.

Two different Massachusetts polls, both conducted earlier this month, show voters support the additional 4% Question 1 tax.

A “yes” vote in California’s Proposition 30 imposes a 1.75% surtax on income over $2 million. The state already has a top rate of 13.3%, the highest rate for a state income tax code. Revenue from the 20-year tax would go to incentives for the purchase of zero-emission vehicles for consumers and businesses. It would also bring in more money for charging stations and forest fire prevention.

California polls show an increasingly tight race. While an early October poll showed 49% of voters supporting Proposition 30 compared to 37% in opposition, a more recent poll showed more than half (52%) of people were likely voting against the measure with 41% support.

Does that mean tax hikes for the wealthy in two reliable Democratic states? Not so fast, observers say. Polls suggest Democrats up and down could play defense of many Republican candidates. In addition, predicting the results of tax-related voting measures is a tricky business.

Such votes are not easy to predict. “Income tax changes have been 50/50 in recent years,” said Jared Walczak, vice president of state projects for the right-wing Tax Foundation. “The results of the polls often surprise outside observers.”

Two years before Massachusetts Question 1, voters in Illinois — another blue state stronghold — rejected the option of turning the state’s flat tax rate into a graduated scale, Walczak noted.

But Michael Mazerov, senior fellow at the left-leaning Center on Budget and Policy Priorities, cautions people against applying what happened in Illinois to California and Massachusetts in 2022. “What that tells us is that all politics is local,” he said.

When Arizona voters narrowly elected Joe Biden as President of the United States over Donald Trump in the 2020 election, they also voted for an additional 3.5% tax on residents of Arizona earning at least $250,000 a year and married couples earning $500,000 – and they did. by a wider margin than the presidential vote. This additional tax revenue would have been used to increase teachers’ salaries, but the provision did not survive a legal challenge.

Still, Mazerov noted, “As far as state tax increases and spending priorities, etc., those things are very much driven by local needs and perceptions.” The argument that higher taxes cause people and businesses to flee “is really grossly exaggerated by people who oppose raising taxes”, he added. “It’s really a very marginal phenomenon.”

There are a number of other tax-related state votes. In Arizona, for example, Proposition 132 would make it harder to approve a tax proposal, requiring 60% of the vote.

But after the Biden administration and congressional Democrats unsuccessfully pressed several ways to levy more taxes on top earners, votes in California and Massachusetts maintain a firm focus on the issue of higher taxes. for the rich.

Another reason why politics is local, especially when it comes to deciding tax matters. Not all state finances are in the same boat: Some state budgets are teeming with revenue, while 21 states have cut income tax rates since last year, Walczak noted.


California recently voted to ban the sale of new gas-powered cars by 2035 and already has the highest income tax rate in the nation for high earners.

So the Proposition 30 battle lines can offer some surprising twists. Lyft (LYFT) is a major funder that poured millions into the campaign to pass the measure, according to state records. Other endorsements come from the California Democratic Party, an array of environmental groups, the American Lung Association, organized labor and more.

Opponents of Proposition 30 include the California Teachers Association, a host of chambers of commerce, the California Republican Party and California Governor Gavin Newsom, a top Democrat who recently proposed a windfall tax on oil companies. California drivers typically pay the highest gas prices in the country

Newsom and his opponents say the ballot measure — which would help funnel money into the electric vehicle market — paves the way for Lyft and other ride-sharing companies to electrify their fleets using taxpayer dollars.

By 2030, California rules state that at least 90% of Lyft and Uber (UBER) miles must come from electric vehicles. The companies have pledged to use completely zero-emission vehicles by then.

In an ad, Newsom said Proposition 30 was “presented as a climate initiative, but in reality it was designed by one company to funnel state income taxes to benefit their business.” In an interview with CNBC last month, Newsom said it was a “terrible move” with “terrible timing.”

“I don’t know why we’re raising taxes in California when we’re running record surpluses,” Newsom said, pointing out that he recently signed legislation committing more than $50 billion to government-related initiatives. climate.

Adding the 1.75% “millionaire” tax to the top 13.3% raises the top rate to 15.05%. California’s 1.1% payroll tax changes starting in 2024 could also raise the top tax rate to 16.15%, Walczak said.

“I am fortunate to be impacted by this tax and happy to pay it to help roll back this existential threat,” said Logan Green, co-founder and CEO of Lyft.

Environmental groups approached Lyft last year for support on a ballot measure to make electric vehicles more affordable and “we saw an opportunity to put real resources behind smart policy,” Green wrote in a statement. blog post.

There’s no money earmarked specifically for Lyft or the ride-sharing industry, he noted. “Rideshare drivers will be eligible like all Californians, but they will not receive any type of priority or preference.”

Lyft referenced “Yes on 30” spokesperson Steven Maviglio. There’s “no way” state residents can meet the 2035 goal of no new gas-powered vehicles “without massive and dramatic steps to get there,” he said, dismissing the argument that higher taxes on the wealthy would scare off high earners.

“Lyft benefits because everyone in California benefits. There’s not a single line on the ballot that directs money to Lyft,” Maviglio said.

Meanwhile, Uber (UBER) “was not involved in the drafting of Prop 30, and we have no association with the campaign,” a company spokesperson told MarketWatch. “We believe tackling climate change is a team sport. That’s why we’re committed to working with the State of California and industry partners to accelerate the green transition as quickly as possible. .”

Rivian (RIVN), the electric car maker, approves the vote measure, according to Yes on the 30 website. A spokesperson declined to comment.


Massachusetts voters have rejected the possibility of creating a progressive income tax code five times, most recently in 1994.

Fans hope this time will be different. “Question 1 is an opportunity to improve our public schools, make college and vocational education more accessible, and fix our crumbling roads and bridges,” said Andrew Farnitano, senior spokesperson for Fair Share for the Massachusetts, the voting committee backing the measure. Fair Share for Massachusetts is a coalition of funders including labor unions, social service providers, public health and environmental groups.

The chance for improvement is done “in a way that makes our tax system fairer,” he said.

The money for education and infrastructure are “very noble endeavours,” but there’s no guarantee the extra tax revenue would go, said Dan Cence, spokesman for the Coalition Against Issue 1, Including Business and business groups.

State coffers are filled with excess cash, and Cence said one of the worries is driving high earners and biotech companies out of the state. “They can do their research wherever they want… We don’t want to kill the golden goose that is biotechnology in Massachusetts,” Cence said, noting that the move from a 5% to 9% rate corresponds to an 80% increase in height. a state income tax bill.

The tax could bring in $1.3 billion in revenue next year if it’s on the books, according to Tufts University’s Center for State Policy Analysis. In the opinion of the researchers, “aggressive tax evasion would be a greater challenge than an exodus of high incomes”.

It’s going to be “difficult” to fully meet the commitment to spend the money on education and infrastructure, researchers said. “Even taking into account the imperfect effect of earmarking, the millionaire tax would still generate substantial increases in a number of high-priority spending areas, potentially reducing economic and racial inequality.”

-Andrew Keshner


(END) Dow Jones Newswire

10-31-22 2251ET

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