Passage of the Mass. ‘millionaires tax’ amends the state’s flat tax rate

Question 1 will amend the Massachusetts constitution by adding 4 percentage points to the state’s 5-percent income tax, for annual earnings over $1 million, to bring more funds to the budget for transportation and education. The union-backed Raise Up Massachusetts coalition, which pursued the measure for the better part of a decade, has said the increase could generate as much as $2 billion annually, while other estimates indicate a lower haul, with one official state projection estimating possibly $1.2 billion.

The tax increase would affect about 20,000 or so taxpayers each year.

Fair Share for Massachusetts campaign manager Jeron Mariani called the approval a “once-in-a-generation opportunity that was years in the making.” And the Massachusetts Teachers Association, the primary financial backer of the Question 1 campaign, issued a statement calling it “an important step forward to creating tax fairness.”

The focus now shifts to the Legislature, which will determine how the proceeds of the increased tax collections will be spent, and how they may be divvied up between transportation and education. Lawmakers also have the power to tweak tax laws in ways that could affect just how many people will end up paying the increased income tax by, for instance, increasing the amount of capital gains that can be deducted for the sale of a home.

Teachers unions spent heavily to fund the “yes” campaign, while transportation advocates have a long list of upgrades they’d like to see to the state’s aging roads and rails.

Those needs were cited by supporters who made calls and knocked on doors in some of the state’s biggest cities. Jessica Andors, executive director at Lawrence CommunityWorks, estimated her group reached about 3,000 people.

“There’s clearly additional funding needed to support infrastructure and public education in our community,” Andors said. “We felt this is a very fair way to ask those who have earned income that is several orders of magnitude more than what most people in the state earn to contribute.”

Meanwhile, some business leaders on Wednesday lamented the outcome of the vote, saying the new tax will damage Massachusetts’ reputation as a place to do business.

“The Commonwealth has tried for years to shed the Taxachusetts label,” said Brooke Thomson, executive vice president at Associated Industries of Massachusetts. “Today is a step in the wrong direction.”

Others worried it could prompt high earners to leave the state, or grow their businesses elsewhere, particularly states such as Florida and New Hampshire that have no state income tax.

“Especially in this era of remote work, I think it’s going to cause a lot of high net worth people to leave Massachusetts because they can work from anywhere,” said Leanne Scott, a tax principal at accounting firm Baker Newman Noyes.

This was the sixth attempt to persuade voters to undo the state’s flat income tax rate — which can only be done via ballot question because it requires a constitutional amendment. In all previous times, first in 1962 and most recently in 1994, the efforts were resoundingly defeated.

This time around, communities inside Route 128, for the most part, voted to support the tax increase. In Boston, 65 percent voted in the affirmative, with the margins even higher in Cambridge and Somerville, where more than 70 percent in each city voted “yes.” In several other big cities, including Springfield and Worcester, Question 1 won by clear majorities. But many Boston-area suburbs as well as many towns in Central and Southeastern Massachusetts leaned more toward opposing it.

The Fair Share Massachusetts committee easily outraised the opposition committee, collecting more than $27 million in donations this year. Most of that money came from teachers unions, namely the Massachusetts Teachers Association and the National Education Association. The business-backed Coalition to Stop the Tax Hike Amendment, meanwhile, raised $14 million this year, primarily from business executives, particularly in the development and investment sectors. The heavy spending fueled waves of TV ads, with the Fair Share spots starting in August and the opposition joining in the fray in September.

Joe Baerlein, a communications strategist who has worked on 10 ballot questions, noted that the tight margin is a sign the opponents’ message wasn’t getting through to enough people.

“Given that they were outspent two to one and got 48 percent of the vote, this suggests to me this was a winnable fight for the no side,” Baerlein said.

He said opponents failed to adequately articulate how there is no guarantee that state legislators will end up increasing spending on transportation and education by the full amount raised by the new tax. Another shortcoming he noted: Opponents failed to get much money from corporate donors, and instead relied heavily on wealthy individuals.

“It allowed the yes side to paint the no side as self-interested millionaires,” Baerlein said. “Company contributions would have made the argument that this is bad for business and economic growth.”

Several business leaders also wondered why Governor Charlie Baker, despite personal objections to Question 1, wasn’t more publicly involved in the campaign against it. (Maura Healey, who was elected to succeed Baker as governor, supported it.)

Leaders in the Raise Up Massachusetts coalition pursued the cause for nearly eight years. They were beaten back by a legal challenge from several business groups in 2018, but refiled the proposal in a way to get around the issue that had tripped them up. Because a change to the state’s constitution was required, the proposal needed to be approved by two votes of the Legislature before it could go to the voters.

Not every business was opposed to Question 1. Karsen Eckweiler, a partner in Boston’s Democracy Brewing, was featured in some of the Fair Share ads. She said she hopes at least some of the new money can be used to support the MBTA because her staff relies on public transit to get to work.

“It’s just a lot of happiness and good spirits over here,” Eckweiler said. “I think it’s a step in the right direction, and it’s exciting to see the people agreeing with that and stepping up.”

Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto. Dana Gerber can be reached at dana.gerber@globe.com. Follow her @danagerber6.