A Response from Rep. Livingstone on amendment #675 to H.5150

I have been asked about a vote that I made last week in the legislature regarding voting against a tax proposal, amendment 675 to H.5150. I thought it would be helpful to write down my thought process. 

First, I have been one of the leading progressive voices on taxation since I joined the legislature. For three consecutive terms, I have advocated for and voted for the “millionaire’s tax”, which imposes a 4% surcharge on all income over $1,000,000. I plan to vote in favor of it again next term to place it on the ballot in 2022 and I will campaign for it.  

This term, there was a debate in the House about raising revenue for transportation. I was a strong advocate for raising revenue progressively. As a result of the efforts of many, including me, a $650 million tax proposal successfully passed in the House in March 2020 that included raising significant corporate taxes. The Senate to date has refused to take up this bill, which is still pending.

Second, I have advocated for progressive revenue for the past few months because I saw tremendous need and understood there was a substantial budget deficit. I was fearful that the combination would mean substantial cuts to the social safety net. This concern was not, however, realized. Because of improved tax collections, federal support, one-time revenue changes, and use of the state’s stabilization fund, there were no cuts to the social safety net.  Instead, there was significant increased funding where needed and for issues for which I strongly advocated - housing insecurity, food insecurity, and legal aid, as well as health care, mental health, the environment agencies, and many others. Overall, the budget the Governor proposed in January 2021 (before COVID) was based on a consensus (House/Senate/Governor) revenue number of $42.7 billion. The budget the House voted on last week proposed to spend $46 billion. 

There are still needs to address. For instance, the MBTA proposed potentially significant cuts to service just as the budget debate began. (I oppose these cuts. The House budget provided the MBTA flexibility to spend capital dollars on operations to get through this period). There are still more funds that can be used in the stabilization or raining day fund. The House budget proposed to use around half of the $3.5 billion available. I would not be surprised if there is another supplemental budget in the coming months to address specific needs that arise.

Third, with that context, I considered my vote on amendment 675 to raise taxes on capital gains from 5% to 9%. Many people have called the proposal a “tax on billionaires.” If that is all it was, it would have been an easy yes vote. Indeed, I have made that exact vote three times already as a state representative. It was not. The amendment proposed to increase the capital gains tax from 5% to 9% (or by 80%) on almost everyone regardless of income level. For example, according to Mass Budget, this increase would have resulted in individuals earning as little as $10,000 total from all sources and joint filers earning $20,000 paying collectively a total of $90 million more in taxes each year. According to Mass Budget, individuals earning up to $30,000 per year and joint filers earning up to $60,000 per year would pay $190 million more if the proposal was adopted. (Mass Budget’s report did not break out any additional income levels for total taxes paid). While I may support tax increases for those who can afford to pay more, I am not going to support an 80% tax increase on these low levels of income.

The amendment did have an exemption for those with disabilities (which was not defined) and elderly (defined as 65 or older). The exemption applied to individuals in these categories earning up to $40,000 per year and joint filers earning up to $80,000 per year. (The numbers cited in the paragraph above were the totals that would be paid taking into account the exemption or paid after the exemption applied). The exemption made sense as elderly and disabled people are more likely to rely on capital gains as a primary source of income. The exemption created a severe cliff effect though. If an elderly or disabled individual earned $40,001 from any source, no exemption would apply at all. They would instead have to pay the full 9% tax. This did not seem right.

Finally, I should add more context. As I mentioned above, the House passed a $650 million tax increase in March 2020. The Senate has refused to take up the bill. When discussion of the budget deficit arose, the Speaker and his leadership team indicated they were open to increasing taxes and that “all options were on the table.” The Senate President has repeatedly said that the Senate would not raise revenue and that it was the wrong time for new taxes. On the day of the House vote, the Senate Ways and Means Chair stated to the media that the Senate would not entertain new revenue proposals. He repeated the same comment two days later when the Senate released its version of the budget. The House cannot act alone, as has been seen with respect to our March bill that has gone nowhere in the Senate. Revenue votes are never popular. Revenue votes in this context are going to fail.      

Because of these concerns and the situation that we faced, I voted no on amendment 675.  Next term, we may face another budget deficit. I will again advocate for new progressive revenue if needed, especially to avoid cuts to social services, but I will not support proposals that impose sharply increased taxes on those who can least afford to pay them, as amendment 675 proposed, or amendments that are not raising targeted amounts to meet specific needs.  

If you have any questions or concerns, please let me know.