Massachusetts court strikes down tax cut ballot measure

The Massachusetts Supreme Judicial Court struck down a ballot proposal for a state income-tax cut that was backed by certain business groups. 

The proposal to slash the tax to 4% from 5% can't go before Massachusetts voters in November because of misleading language in the official summary that was used to gather the signatures required to put it on the ballot, the state's highest appeals court ruled Thursday. The cut would have shrunk tax bills for Massachusetts residents of all income levels while costing the state more than $5 billion in annual revenue, according to some estimates, equal to as much as 9% of its budget this fiscal year. 

A coalition of business organizations was behind the measure, arguing it would boost the state's competitiveness in the face of a 4% surtax on income over $1 million that was approved by voters in 2022. The tax cut drew strong pushback from state officials including Governor Maura Healey, labor unions and even some business leaders typically in favor of such relief. Opponents said the proposed tax cut would debilitate state services without meaningfully improving the economic climate. 

The proposal has been popular with voters, with even its strongest opponents acknowledging it would likely pass this fall. An Emerson College poll in May found that 62% of respondents supported the tax cut, while 19% opposed the measure and 20% weren't sure. Households earning the state median income of $104,000 would save about $1,000 a year, according to a Massachusetts Taxpayers Foundation analysis.

"Today's unprecedented ruling prevents Massachusetts voters from weighing in on a popular proposal to address the state's cost-of-living crisis," the Mass Opportunity Alliance, a group formed to advocate for a better business climate whose research had inspired the proposal, said in a statement. "It does not change the underlying reality: Massachusetts remains one of the most expensive states in the nation, with too many residents leaving in search of greater opportunity and a lower cost of living."

A group of opponents launched a legal challenge targeting the summary language. That description, which came from Massachusetts Attorney General Andrea Campbell's office, was flawed because it said the cut would apply to income "other than… capital gain income" when in fact capital gains would fall under the law, the Supreme Judicial Court ruled. By failing to specify elsewhere that taxes on capital gains would also be cut, the summary is "significantly misleading and likely to influence voters," according to the court. 

Leaders of organizations that had opposed the measure cheered the ruling. "Today is a good day for anyone in Massachusetts who cares about our local schools, our healthcare system, or the public services we all rely on," Deb Pimental, executive strategist of the Coalition for Social Justice, said in a statement. 

Prior to the court ruling, Massachusetts House Speaker Ron Mariano had signaled openness to a legislative compromise that would have taken the income tax cut off the table. The business community is more unified around other ideas considered more palatable to lawmakers, such as lowering Massachusetts' estate tax and reforming the state's unemployment insurance system.

The ruling doesn't apply to a companion proposal to cap annual state revenue growth, which isn't expected to have as significant an effect on the state budget. That measure, which features some of the same supporters and opponents as the income-tax cut, is still set to go to voters in November.