Lawyers for five prominent business leaders, including AIM President Rick Lord, argued before the Massachusetts Supreme Judicial Court today that a proposed surtax on incomes of more than $1 million violates the state constitution.

The business leaders are challenging a proposed 2018 ballot question that would amend the state constitution to impose a graduated income tax and direct the revenue to be spent on transportation and education. The amendment would add a new four percentage-point tax (representing an 80 percent increase in the personal income tax rate) on all incomes more than $1 million.

The plaintiffs assert that the proposal is riddled with constitutional flaws. It combines a graduated income tax that has been rejected five previous times by Massachusetts voters with attractive spending in a prohibited manipulation of the vote called “logrolling.”

And it does something that has never been done before: never in the history of Massachusetts has a tax or tax rate been set in the constitution, making the new tax essentially permanent and unchangeable.

Attorney Kevin Martin of Goodwin Procter, who represents the business leaders, argued that it is critical to understand the difference between typical initiative petitions (also referred to as ballot questions) that amend state statutes, and this ballot question that would change the Massachusetts constitution and strip the Legislature of its ability to easily amend the policy in the future. Only three initiative petitions to amend the constitution have ever appeared on the ballot. 

The named defendants in the lawsuit are Attorney General Maura Healey and Secretary of State William Galvin.

The court today pressed advocates of the ballot question and the Attorney General’s office about the issue of combining the seemingly separate issues of a tax increase and funding for transportation and education.

“Why not add energy, health care, pension reform?” asked Associated Justice Scott L. Kafker, who mused that voters were apparently being asked to render a decision on three distinct policy matters within a single ballot question.

“So, what is the unified public policy here?” added Associated Justice Elspeth B. Cypher.

AIM opposes the graduate-tax proposal on a policy basis because it would harm thousands of small and medium-sized business that pay taxes on an individual basis. The Massachusetts Department of Revenue estimates that 80 percent of the returns that would be affected by the surtax include some amount of business income.

The five plaintiffs in the suit are: Christopher Anderson, President of the Massachusetts High Technology Council, Inc. (MHTC); Christopher Carlozzi, Massachusetts State Director of the National Federation of Independent Business (NFIB); Richard Lord, President and Chief Executive Officer of Associated Industries of Massachusetts (AIM); Eileen McAnneny, President of the Massachusetts Taxpayers Foundation (MTF); and, Daniel O’Connell, President and Chief Executive Officer of the Massachusetts Competitive Partnership (MACP).

“We appreciate the careful consideration the SJC is giving this case, which is the first since 1937 to involve an initiative petition to amend the constitution.  Their questions to both sides were thoughtful and probing, and we await their decision,” said Martin.

Conact Brad MacDougall a bmacdougall@aimnet.org to receive updates on this issue.