Millionaire surtax: What’s the split between education, transportation?

Some say it should be 50-50, others leave it to Beacon Hill

THE CONSTITUTIONAL AMENDMENT approved by voters in November establishes a 4 percent income tax surcharge on income over $1 million, and directs that the money should go to transportation and education.

But the amendment doesn’t say how the money should be split between transportation and education. Should it be 50-50 or something else?

Now that millions of dollars from the millionaire tax is starting to trickle in, it’s a question that needs answering.

Doug Howgate, the president of the Massachusetts Taxpayers Foundation, says the law mentions only two pots for the money to go in. “The most straightforward way to do that is to distribute it 50-50,” he said.

Jim Aloisi, the former transportation secretary who serves on the board of TransitMatters, tends to agree.

“I suspect if you talk to anyone in the transportation advocacy community, they would support a 50-50 split,” he said. “That’s the only way the Legislature can keep faith with voters.”

But Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University, views the situation differently. He says put the money where it’s needed, and don’t stick to rigid formulas.

“How troubled would I be if it was 80 percent education and 20 percent transportation?” he asks. “The answer is not troubled at all if that’s what the Legislature determines where the money needs to go.”

The Massachusetts Teachers Association spent tens of millions of dollars on the so-called Fair Share campaign to pass the millionaire tax. The union’s priorities for this legislative session are securing investments in public higher education, ending the MCAS high-stakes testing regime, winning the right to strike for teachers, and ensuring a “dignified retirement” for educators.

Some of those initiatives will cost money. “We assume that revenue from Fair Share can be applied, but there is no specific formula we suggest for how those revenues are used to address public education and transportation needs,” said Scott McLennan, a spokesman for the MTA.

At a legislative hearing earlier this week, top budget officials from the House, Senate, and Healey administration indicated they would abide by the will of the voters and appropriate money raised from the millionaire tax for transportation and education.

The Department of Revenue estimates the surtax will 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.

But the legislative and Healey administration officials indicated they hadn’t decided how the money would be split up and didn’t know what the spending priorities would be.

Sen. Michael Rodrigues of Westport, the chair of the Senate Ways and Means Committee, said the money would go for “new initiatives.”

One possibility would be to use the revenue stream from the millionaire tax to finance the issuance of bonds that could be used for capital projects. Gas tax money is currently used in this way for transportation initiatives.

If the Legislature controls the purse strings, that means a wide variety of groups are likely to lobby for a portion of the funding.

On Wednesday, the Board of Higher Education laid out two priorities for funding from the millionaire tax – additional grant money for about 100,000 students and elimination of family contributions for students whose family annual income is less than $125,000. The two initiatives combined would cost the state more than $300 million.

“The current system is not adequate to the goals we have,” said Chris Gabrieli, the chair of the Higher Ed board. “Let us not miss this moment of opportunity to make real change happen.”