BOSTON — Backers of the state’s “millionaires tax” are accusing the Healey administration of defying the will of voters by tapping into proceeds from the tax to close out the previous fiscal year budget.
A supplemental budget filed by Gov. Maura Healey aimed at closing out the previous fiscal year budget calls for spending $225 million in “millionaires tax” proceeds to cover costs for grants to child care programs, universal free school meals, transportation service expansions and other items.
But the Massachusetts Teachers Association, a chief proponent of the tax, is blasting the proposal to use the money this way, saying the funding needs should have been covered by other revenue sources.
“Fair Share funds must be used to build upon the existing spending for public education and transportation, and not become dollars lost on balance sheets,” MTA President Max Page said in a statement. “Gov. Healey’s supplemental budget proposal defies the will of the voters and the spirit of Fair Share, which is raising money to grow our public education and transportation systems.”
Voters approved the so-called Fair Share proposal in the 2022 elections, setting a new 4% surtax on people with incomes above $1 million a year. The state collected more than $2.1 billion from the tax in the previous year, exceeding projections by budget writers.
A spokesman for the state’s Executive Office of Administration and Finance defended the governor’s proposal, saying the spending is in line with the intent of the voter-approved tax and the state budget.
“Our administration has consistently demonstrated our commitment to fulfilling the will of the voters who approved the Fair Share surtax to support our education and transportation systems,” the agency said in a statement. “The supplemental budget filed by the Governor maintains that commitment by proposing to use a limited amount of surplus surtax for education and transportation programs like universal school meals and child care provider grants.”
The approach, the agency said, “aligns with how surtax revenue was budgeted in Fiscal Year 2025 and is necessary to close Fiscal Year 2024 in balance.”
Healey’s $714 million supplemental spending plan, which requires legislative approval, seeks to close funding gaps for public health, substance use treatment and education, and fund collective bargaining agreements with labor unions.
It also calls for overhauling how Massachusetts approves renewable energy infrastructure projects, which has also drawn criticism from lawmakers who view it as an end-run around a stalled clean energy bill.
The issue of how billions of dollars in proceeds from the tax will be spent by the state government was a key issue in the debate over the proposal.
A chief criticism was claims by tax proponents that the money will be devoted exclusively to transportation and education spending were misleading.
A 2022 report by Tufts University’s Center for State Policy Analysis ahead of the tax’s approval by voters warned that while the plan clearly stated the money must be devoted to education and transportation, not all the surtax revenue is likely to be spent in those areas.
“The problem is fungibility, or the ease with which lawmakers can shift money between programs,” the report’s authors wrote. “There is nothing illegal or untoward about this approach; it’s a common part of legislative horse-trading.”
The report estimates that for every dollar raised by the surtax, spending on the stated earmarks is likely to increase by 30 cents to 70 cents, with the remainder being “diverted to other areas of the budget,” they wrote.
It also noted that revenue from the tax would be “highly volatile” and is likely to rise or fall sharply, depending on the economic conditions. The number of people paying the tax will increase gradually over time, the report noted.
Supporters say taxing the rich means more money to improve neglected public schools, expand child care options, and fix potholed roads and crumbling bridges.
Opponents argue the tax is hurting businesses and driving away corporate investment and job creators, while putting a drag on the state’s economy as it recovers from residual impacts of the pandemic.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.