BOSTON (WHDH) - A “yes” vote on Question 5 could put more money back in Massachusetts taxpayers’ pockets, but opponents warn it would come with a cost.
In 1986, Massachusetts voters passed a ballot measure limiting how much tax revenue the state can collect every fiscal year based on wage salary and growth. Any tax revenue that exceeds that limit must be returned to taxpayers.
The law has only been triggered twice: in 1987 and again in 2022, when a post-pandemic stock market boom generated roughly $3 billion in taxpayer refunds.
Supporters say the infrequency of refunds is proof that the current system isn’t working.
“If you recall, it had been so long since the last refund that most folks, including the state government, forgot this law even existed,” said Chris Keohan, spokesperson for Taxpayers for an Affordable Massachusetts. “This is really to focus folks in and make sure that we are growing at a reasonable limit so that we’re not continuously putting the burden back on working families here in Massachusetts.”
Under the current system, the revenue cap is calculated using the maximum amount of tax revenue the state was allowed to collect during the previous fiscal year. Because the state rarely reaches that maximum, supporters argue the existing formula does little to limit revenue growth.
Question 5 would change the formula starting on July 1, 2027 so the cap is based on the amount of tax revenue the state actually collected from the previous fiscal year. The proposal would also add income tax revenue collected through the millionaire’s tax when calculating the revenue limit.
The measure’s primary backers include Taxpayers for an Affordable Massachusetts and Massachusetts Opportunity Alliance, a coalition of business groups founded by the Massachusetts High Technology Council, the Pioneer Institute and the Massachusetts Competitive Partnership.
Supporters say the revised formula would limit government growth and spending, while encouraging lawmakers to plan budgets further into the future.
“The budget can grow every year, but within reasonable limits,” Keohan said. “That’s why we have such an affordability crisis here in Massachusetts. This is one of the many pieces that could be adopted to make it more affordable to live here.”
A study from the Tufts Center for State Policy Analysis found that the proposed formula could trigger two to four times as many refunds, potentially returning as much as $250 per year to taxpayers. But researchers warn those refunds could occur even when the state’s economy has not fully recovered from a downturn.
“Imagine that you have a recession and revenues collapse. But the year after that they bounce back,” said Evana Horowitz, executive director at the Tufts Center for State Policy Analysis. “That bounce back looks like a big jump in revenue. Is it a big jump in revenue? No. You’re still way below what you used to be, and you could easily have refunds in that situation, which is bad for the state.”
Critics say those refunds could leave lawmakers with less flexibility to balance the budget, potentially forcing cuts to public services such as education, healthcare and affordable housing. Opponents also caution that the state’s revenue needs can change over time as public priorities and costs evolve.
“What the Commonwealth does evolves over time and how much money we need to gather to accomplish those things should be allowed to change over time,” said Phineas Baxandall, director of research and policy analysis at the Massachusetts Budget and Policy Center. “This mechanism stops that from happening, it’s kind of like an algorithm which prevents us from doing things that we might want to do together.”
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