BOSTON – Even as industry leaders warned how the tax hike could erode the state's economic strength, Gov. Charlie Baker steered clear in a speech to technology leaders Monday of the millionaires tax proposal that will again be before the Legislature this week.
Baker, instead, sought the help of technology industry executives in passing education and housing legislation that he described as critical to developing and retaining a highly qualified workforce.
The governor said after his speech that raising taxes was not the "solution" to the challenges faced in Massachusetts, but he avoided stating directly whether he would oppose a tax on millionaires if it were to reach the ballot. Supporters say the tax would generate needed revenues for education and transportation.
"We have along way to go on this one and obviously at some point we'll have a conversation about it but I've said many times that I don't think the solution to Massachusetts issues or problems is to raise taxes and I've said that many times. And I continue to believe it," Baker said.
The governor spoke to the Massachusetts High Technology Council at its annual meeting Monday at the Seaport Hotel. On education, Baker said his bill seeks to provide additional financial resources as well as accountability measures to help improve underperforming schools and districts.
"There is a large and lively debate going on about what this should look like," he said.
While Baker acknowledged a debate over education funding, he said the money question would "work itself out" and he expects a final bill to reach him within a year.
As for housing, Baker noted that even in his historic election in 2018, he and Lt. Gov. Karyn Polito couldn't crack the 66 percent threshold that's needed in cities and towns to get around zoning rules to build new, more affordable housing. According to election results, Baker received 66.6 percent of the vote.
He encouraged business leaders to help him convince the Legislature to pass his "Housing Choices" bill that would lower that threshold to a simple majority.
The governor, however, did not address the proposed surtax on wealthier residents that High Tech Council President Chris Anderson said was putting the state's economic development advantages at risk.
House and Senate lawmakers will debate and vote on the proposal Wednesday to impose a 4 percent surtax on income over $1 million, the first step of a four-year process to get it on the ballot in 2022.
The proposal appears to have more than enough support in the Legislature to advance, and won't face the face hurdles that caused the courts to strike a similar proposal from the ballot last summer.
Anderson preceded the governor, and warned that Massachusetts could be following in the footsteps of states like Connecticut, Illinois and New Jersey, where legislators have pursued tax and fiscal policies that have driven companies to move to other states like Tennessee, Georgia and Florida where the tax burden is lower.
"We could become Connecticut in a New York minute," said Anderson, ticking off companies like Mercedes, Aetna and others that have left Connecticut.
Anderson called the Massachusetts economy the "envy of the nation," but said lawmakers should be focused on improving things like transportation without raising new revenue.
The council, he said, believes that a shortage of project management personnel, not revenue, is the "most critical impediment" to improving the state's infrastructure, and that public-private partnerships must be an element of the solution.
Anderson also said that the state should be working with employers to better structure worker commutes to reduce congestion.
"This week the Massachusetts Legislature begins a renewed effort to change the state Constitution to raise personal income tax rates on different classes of taxpayers and lock those rates in the Constitution," Anderson said. "However, if we instead aim at the right target first we have a better chance of avoiding the negative fiscal and competitive consequences that we've all seen in Connecticut, Illinois, New Jersey and other states that have enacted policies that ended up ruining their economies."
After his remarks, Baker told reporters that some companies who have moved to Massachusetts have cited the state's relatively "steady and stable" tax burden and its competitive tax position relative to other northeast states as a strength.
"But the thing they all come back to over and over and over again is the quality of people who live here and the workforce that's available to them and the creativity and the sort of ecosystem that exists within Massachusetts, driven in many ways by our colleges and universities and by the existing business and investors that are already here," Baker said.
U.S. Rep. Joe Kennedy, who followed Gov. Baker in addressing the Massachusetts High Tech Council, told reporters that despite the business strengths of Massachusetts there are also inequities in transportation and housing that government must address.
"I don't think you're doing all this without additional revenue and so I support it," Kennedy said of the millionaires tax.
He added, "I'm open if folks have other suggestions about how your going to be able to gather the revenue to meet some of these obligations, I'm certainly open to that but we have to acknowledge that as booming as Greater Boston is that doesn't reflect some of the structural challenges that affect parts, like the southern part of my district, let alone opportunities to help grow western Massachusetts or connect it better regionally throughout New England."
Ahead of Wednesday's debate, Reps. Alice Peisch and Ann Margaret Ferrante and Sen. Barry Finegold have filed an amendment to allow to a fully graduated income tax instead of just the surtax on income over $1 million.
Baker had a sharper reaction to that idea that the millionaires surtax.
"I would certainly oppose that," he told reporters.
The Massachusetts Taxpayers Foundation echoed the message from Anderson in an analysis released Monday where the group concluded that the millionaires tax was not "sound tax policy." The foundation also said the estimated $1.9 million in new tax revenue was "unlikely" to materialize due to the mobility of wealthy taxpayers and the volatility of capital gains taxes.
"Given the probability of changes to the economy and taxpayers predilection to avoid taxes it's extremely likely that revenue collections will fall well short of projections for these two reasons," the foundation said.
MTF also said that a surtax on income over $1 million is not the best option available to legislators, and would tie the hands of the Legislature to respond until at least 2027 if the experiment fails.
The foundation suggested a higher income tax with more personal deductions or a lower sales tax to achieve a more progressive tax policy.