WHEN THE MILLIONAIRE TAX won final approval in 2020, its supporters suggested the money would go for moonshot initiatives that policymakers had only dreamed about in the past. They also promised there would be no shell games, that all the money would go to new initiatives in education and transportation and not just be displacing spending already in the budget.
With the release of her budget on Wednesday – the second including millionaire tax money — Gov. Maura Healey made some interesting moves. She delivered on some wish-list projects, missed on a couple others, and proposed a way to turn millions of dollars in millionaire tax money into billions of dollars for budget priorities.
One thing is very clear. In a year when tax revenues are projected to grow only a little, the estimated $1.3 billion from the 4 percent surcharge on income over $1 million was the only area of the budget where policymakers could have some fun. The pot of money is $300 million larger than it was in last year’s budget, and it’s the source of funding for all of the budget’s big ideas.
For example, $170 million is going to fund free school breakfasts and lunches for every public school child in the state. Another $311 million is going for early education and care, along with $30 million to boost reading instruction for the state’s youngest readers. There’s another $40 million that would allow anyone making less than 200 percent of the federal poverty level to take a ride on any branch of the MBTA at half price.
Evan Horowitz, the executive director of the Center for State Policy Analysis at Tufts University, said these programs fit the wish-list goal of the millionaire tax. “It’s not clear where that money would have come from otherwise,” he said.
But some of the other millionaire tax spending is pretty pedestrian. Healey wants to steer $124 million in millionaire surtax money into the Commonwealth Transportation Fund and from there to the MBTA operating budget. The $124 million is on top of an existing appropriation of $187 million, bringing the total T funding to $314 million.
All this money is needed at the MBTA, which is staring at a budget deficit in the coming fiscal year that is expected to grow rapidly in coming years as expenses far outweigh revenues. But the investment is hardly revolutionary; it’s mostly plugging budget holes.
Doug Howgate, president of the Massachusetts Taxpayers Foundation, is more charitable in his assessment of the millionaire tax money going to the MBTA. He said the funding isn’t very sexy, but it’s needed to address longstanding problems at the T.
“The pragmatic part of me, which is a big part of me, feels if you don’t do that you’re not going to be able to do the exciting stuff people want to talk about,” Howgate said. “It may not be the most exciting, but it may be the most critical.”
Healey’s other big idea for millionaire tax money is to use some of the funds to float bonds. Healey is proposing that a portion of the money going into the Commonwealth Transportation Fund be used to borrow as much as $1.1 billion over the next five years. Roughly $300 million of the bond money would go for track work eliminating slow zones in fiscal year 2025 and $800 million for MBTA and MassDOT projects over time. The debt service on the bonds would be paid off over a decade or more with recurring funding from the millionaire tax.
The governor has a similar bonding proposal for higher ed. She is proposing an annual allocation of $125 million in millionaire tax money to leverage and pay debt service on some $2.5 billion in bonds that would be used to update and decarbonize buildings across the spectrum of public higher education colleges and universities.
The bonding idea is a great way to get a bigger bang for the millionaire tax buck, but it has a few possible drawbacks. First, it ties up a chunk of millionaire tax money for a long time – bonds are usually paid off over a decade or more – so once committed it’s difficult to switch gears and go in a new policy direction. Second, the bond money spending, because it would be paid out over time, may be more difficult to track to make sure it is going for its intended purposes.
Perhaps the biggest concern is that the money over time just gets rolled into regular day-to-day spending, and loses its luster as money set aside for something special.
