Fred Berman, Mystic Mashup Indivisible
How Two Ballot Referenda Propose to Reduce State Income Tax Revenues and the Implications
While much attention has been understandably focused on the threats posed by the Trump Administration to our democracy, to the civil and constitutional rights of our neighbors, to our safety net programs, to our school systems and universities, and to our ability to sustain and strengthen the physical infrastructure that our economy needs to grow while protecting the environment – housing, public transportation, clean energy … another less well-known threat has been brewing.
To learn more about two tax-cutting ballot referenda sponsored by the Mass. High Tech Council, the Pioneer Institute, and their anti-tax allies, I attended a workshop at the 2026 Progressive Mass annual meeting, led by Harris Gruman, Executive Director of the SEIU Mass. State Council and a co-founder of Raise Up Mass., the coalition that led the successful fight to pass the Fair Share millionaire tax constitutional amendment.
The two tax-cutting ballot referenda championed by the High Tech Council, et al. would, if passed, undermine our state’s ability to adequately support health care access, human services, public and post-secondary education systems, and the ongoing maintenance and enhancement of essential infrastructure – transportation, energy, natural resource protection – that make Massachusetts such an outstanding state to live in. Of course, all of these sectors have already been targeted by the Trump Administration’s “One Big Beautiful Bill,” which will cut $3.7 billion in federal funding over the three-year period that began in 2025. Like the metaphoric frog in boiling water, we might not feel the impacts of these referenda in the first year, but by years two and three, when we have lost $7-10 billion of the state’s $60 billion budget, the hemorrhaging will have become all too apparent.
One ballot question calls for reducing the state income tax rate from 5% to 4% over a three-year period. The Mass. Budget and Policy Center (“Mass Budget”) calculated that when fully implemented, that 20% income tax cut will cost the state about $5 billion/year or about 11.5% of the state’s total $43.7 billion tax revenue.
A second ballot question calls for changing the so-called Chapter 62F formula that prescribes the annual limit or cap on tax revenue collection. The mechanism proposed by this ballot initiative to reduce tax revenues is more arcane, but here’s my best shot at an explainer, based on what I learned at the workshop and online:
How the Current Tax Revenue Limit Works
Established in 1986, Question 3 added Mass General Law Chapter 62F creating a state tax revenue limit and set it equal to the sum of the prior year’s state tax revenue limit plus the average growth of Mass. wages and salaries over the prior three years.(*1)
That is,
This year’s total tax revenue limit
=
Last year’s total tax revenue limit
X
1 + percent of 3-year average wage/salary
growth (or 1, if the wage/salary growth avg. was negative)
Under the existing provisions of Chapter 62F, if this year’s revenue cap was $46.38 billion and statewide wage/salary growth over the past 3 years averaged 2.5% per year, the revenue cap for next year would be $46.38 billion X 1.025. Note that the 4% millionaire’s tax is not taken into account (*2). Importantly, the existing formula almost always results in an annual increase in the total tax revenue cap, and never lowers that cap, with the amount varying based on the magnitude of wage and salary growth. Only twice in the past 38 years, in 1987 and 2022, has tax revenue exceeded the cap and required a refund to taxpayers.
How the Ballot Referendum Revising the Chapter 62F Tax Cap-Setting Algorithm Would Change Things
The Chapter 62F Referendum would revise the formula for the state tax revenue limit in two ways: (1) It would add the millionaire’s tax into the equation, and (2) instead of basing this year’s tax revenue limit on last year’s tax revenue limit, it would base this year’s tax revenue limit on last year’s net tax revenues:
This year’s total tax revenue limit
=
Last year’s total net tax revenues
X
1 + percent of 3-year average wage/salary
growth (or 1, if the wage/salary growth avg. was negative)
This is a subtle change with profound implications.
- Instead of steadily increasing the tax revenue cap, the Mass High Tech Council’s proposed algorithm would base this year’s tax revenue cap on the magnitude of last year’ net tax revenue; that is, the tax cap would decrease if the product of last year’s net tax revenue <times> last year’s wage/salary growth factor was lower than the prior year’s net tax revenue, and the tax cap would increase by only a small amount, if last year’s net tax revenue was only marginally higher than the prior year’s net tax revenue and/or if last year’s calculated 3-year average growth in wages/salaries was low. Three subtle factors to note:
- The inclusion of the 4% millionaire tax in the calculation of net tax revenue adds volatility to the calculation of the tax cap, because most of a millionaire’s income typically comes from investments, (e.g., the stock market) whose payouts may significantly vary from year to year. So even if other tax revenues increase from year to year, a bad stock market year could result in a lowered tax cap.
- Basing this year’s tax cap on last year’s net tax revenue – rather than basing it on last year’s gross tax revenue – means that if gross tax revenues were high enough last year to require a refund to taxpayers, this year’s tax cap will be based on the level of tax revenue remaining after that refund.
- That is, (a) a low tax revenue year results in a lower increase or even a decrease in the tax cap; (b) a higher tax revenue year coming after one or more years of low tax revenues will be subject to a lower tax revenue cap, necessitating issuance a tax refund; and (c) the refund requirement in a strong tax revenue year will result in a lower tax cap the following year, because the tax cap is based on net (not gross) tax revenues. In summary, the proposed revision to the Chapter 62F algorithm for calculating the tax revenue cap does exactly what the ballot referendum’s sponsors intended: it reduces the State’s tax collections.
To see how big an impact on net tax revenue (i.e., after required tax refunds) the Chapter 62F formula change might have, I simulated 15 years of tax collections under the following assumptions about the average annual increase in non-4% (millionaire tax) tax revenues: simulation #1 assumed a 5.25% average annual increase, simulation #2 assumed a 4.25% average annual increase, simulation #3 assumed a 3.25% average annual increase, and simulation #4 assumed a 2.25% average annual increase. In each simulation: (a) I allowed gross tax revenues (including the 4% millionaire tax) to decline in two of the 15 years. Each simulation used the same projections about annual growth in salary/wages (ranging from 1.5% to 3% and averaging at 2.48%/year) and the same projections about the annual level of revenues from the 4% millionaire tax (ranging from $1.3 to $3 billion/year and averaging $2.7 billion/year. Here’s what I found:
Average Annual Revenue Increase (excludes 4% tax)
Total Revenue Collected (15 yrs.)
(includes 4% tax)
Taxes Refunded Using Current Algorithm (15 yrs.)
(% of Total Revenue)
Taxes Refunded Using Revised 62F Algorithm (15 yrs.)
(% of Total Revenue)
# Years Chapter 62F Algorithm Required Refund
Existing Algorithm
# Years Chapter 62F Algorithm Required Refund
Proposed Algorithm
Simulation 1
5.25%
$1,055.59 billion
$97.11 billion (9.2%)
|
$231.86 billion (21.96%) |
11 of 15
15 of 15
Simulation 2
4.25%
$973.12 billion
$30.71 billion (3.16%
$104.91 billion (10.78%)
6 of 15
15 of 15
Simulation 3
3.25%
$898.10 billion
0
$46.40 billion (5.17%)
0 of 15
15 of 15
Simulation 4
2.25%
$829.83 billion
0
$23.85 billion (2.87%)
0 of 15
11 of 15
- If annual growth in gross tax revenue (incl. the 4% millionaire tax) consistently exceeds annual growth in salary/wages, gross tax revenue will start to consistently exceed both the current tax cap and the tax cap proposed by the ballot referendum. As noted above, for simulation purposes, annual growth in salary/wages averaged 2.48%, varying year to year and ranging from 1.5% to 3%.
- The more consistently gross tax revenue (incl. the 4% millionaire tax) exceeds the annual cap, the higher the percentage of gross tax revenues that will be refunded to taxpayers – with the largest sums, of course, going to the wealthiest taxpayers.
Why would the Mass. High Tech Council (MHTC), Pioneer Institute, and their conservative anti-tax partners call for income tax cuts that, combined with cuts in President Trump’s “One Big Beautiful Bill,” will cause at least an $8 billion/year budget shortfall – more than three times the losses caused by the 2008-09 Great Recession, when annual state revenues fell by $2.5 billion?
And why would the remaining financial and tech firms and educational institutions represented on the Board of the High Tech Council – a number of organizations formerly on the MHTC Board have left the Board due to the MHTC’s sponsorship of these tax-cutting initiatives – support state revenue losses which will undermine the state’s ability to adequately support economic development, infrastructure maintenance and improvements, public safety, and educational excellence from pre-school to post-secondary … in the state where their families and employees live and work, and where the educational institutions that serve them and train their future staff are located?
Harris Gruman’s and the Raise Up Mass Coalition’s answers are two-fold:
- Greed: This isn’t about helping ordinary working people; these initiatives are part of a strategy to claw back some of the income that the Fair Share Millionaire’s Tax has cost members of the MHTC Board and their colleagues. The average annual tax cut that the richest 1% of taxpayers would receive is estimated at $31,600 ($608/week). The average annual tax cut that the bottom 80% of taxpayers would receive is estimated at $534 ($10/week).
- Greed: “It is clear that the MHTC intends to use the threat of these ballot initiatives – and the incredible damage they would do to Massachusetts – to blackmail legislators into cutting taxes for the ultra-rich and large corporations. Faced with their inability to defeat the Fair Share Amendment, they have instead chosen extortion: well-financed business interests are seeking to elevate themselves over our state government as final decision makers on Massachusetts fiscal policy.”
Harris cautions that, “This isn’t a serious effort to tackle Massachusetts’ real competitiveness problems, like the sky-high cost of housing and childcare that are driving low- and middle-income working famlies out of the state. It’s just another attempt to make the rich richer.”
He warns that “State leaders should not be tempted to negotiate in response to this blackmail attempt. If they do, the MHTC and its backers will come back with similar threats and new demands every cycle, raiding public coffers for their own benefit, while shifting the costs of diminished public services onto everyone else.”
“Furthermore, while their goal may be to extort targeted tax cuts for the ultra-wealthy and corporations from our Legislature and Governor, we can’t rule out some of them taking this all the way to the ballot as a show of force.”
For now and the next few months, the goal is getting the sponsors to end their effort to get these referenda on the ballot, and to get them to stop using the threat of these ballot initiatives to leverage a rollback of the historic Fair Share victory for fair and adequate taxes.
[1] According to an August 2025 Mass. Dept. of Revenue press release, the 5% Mass. income tax generated $23.7 billion and the 4% millionaire tax added another $3 billion in FY 25. Sales and use taxes added $9.6 billion, corporate and business taxes added $4.7 billion, and “all other” tax collections added $2.7 billion. Tax collections totaled $43.7 billion.
[2] A September 2025 report from the State Auditor’s office explains how Chapter 62F has worked since its inception in 1987, and in particular, why taxpayers got refunds from the Mass. Department of Revenue (DOR) for the fiscal years 1987 and 2022. The third footnote on page 10 explains that per the provisions of the Fair Share Amendment, revenue from the millionaire’s tax is not currently included in calculating net revenue for the purposes of determining whether net revenue exceeded the tax cap.
