THE SUPREME JUDICIAL COURT on Monday unanimously ruled that the House budget proposal is a money bill under the state constitution, a decision that means the Senate was legally within its rights to include several major tax initiatives in its version of the fiscal 2016 spending plan.
The decision doesn’t mean the Senate’s sweeping tax proposals freezing the income tax rate, expanding the earned income tax credit, enlarging personal tax exemptions, and assessing a tax on flavored cigars will become law. The ruling only means that the Senate can legally push for its tax measures in ongoing budget negotiations with the House. Any provisions agreed to by the two branches would also have to win the support of Gov. Charlie Baker, who has expressed concern about the Senate’s income tax provision, which would freeze the income tax rate at 5.15 percent instead of allowing it to ratchet down to 5 percent.
The SJC said the dispute between the House and Senate raised important questions of law that had not been addressed in 235 years. “It also appears that this provision has been interpreted and applied differently by different Senate presidents and senators,” the court said. “In short, the questions are important, unresolved, and challenging to answer.”
The Massachusetts Constitution includes a provision that requires all money bills to originate in the House of Representatives. House Speaker Robert DeLeo, who opposes raising taxes, insisted the House budget proposal was not a money bill because it did not raise taxes, and therefore the tax measures contained in the Senate budget plan were not allowed.
Senate President Stanley Rosenberg insisted just as strongly that the Senate tax proposals were legal because the House opened the door to the tax initiatives by including two provisions in its budget plan that either raised or lowered state tax revenues.
To resolve the standoff over what constitutes a money bill, the Legislature asked the state’s highest court for an advisory opinion.
In its ruling, the court quoted from a 1781 SJC decision that said money bills are “limited to bills that transfer money or property from the people to the state.” The court then ruled that one House budget provision, delaying for a year the start of a corporate tax deduction, meets that definition because it increases state tax revenues by $45.8 million. The delay in the corporate tax deduction was originally included in Baker’s budget proposal and picked up and ratified by the House and later the Senate.
The court declined to take a stand on whether a second provision in the House budget met the threshold for a money bill, in part because the law is unclear and partly because it didn’t need to since the delay in the corporate tax deduction had already qualified the House budget as a money bill.
The second provision in the House budget raised from $2 million to $5 million the cap on tax credits that can be awarded to people who donate land to the state. With the higher cap on the tax credit, the state could see its tax revenues actually fall. The court noted that the SJC had not previously ruled on whether legislation reducing state tax revenues would qualify as a money bill.
The court looked for guidance on the second provision to federal rulings, since the US Constitution copied the Massachusetts Constitution’s language requiring money bills to originate in the House. The US Supreme Court has not ruled on whether a measure reducing state revenues would qualify as a money bill, but a number of federal appeals court decisions have held that such measures would qualify. The SJC said the federal decisions were not binding on Massachusetts courts.
Both DeLeo and Rosenberg issued statements thanking the SJC for its decision and urged quick action by a conference committee trying to iron out differences between the House and Senate budget proposals.
