By DJ Cence

Massachusetts State Legislators are now preparing to begin the Conference Committee debate to negotiate the differences between each branch’s proposed budget plans for fiscal year 2026 (FY26). Part of that debate is the allocation of funds from the Fair Share Amendment, or “Millionaire’s Tax,” the controversial amendment enacted in 2022 that altered Massachusetts’ longstanding five percent flat income tax rate.

Now, in its third year, the Fair Share Amendment has seen some results in the programs it funds and continued revenue growth. With disagreements brewing in the State House about how best to distribute this money, let’s explore how the amendment has evolved since it was first introduced.

History

As stated, the Fair Share Amendment was enacted following the 2022 general election, where Massachusetts voters passed the measure as a constitutional amendment. Included on the ballot, the amendment added an additional four percent surcharge in addition to the flat five percent state income tax for all income over $1 million.

Once revenue is collected, both the House and Senate Ways and Means Committees must create a supplemental budget plan to distribute the funds. It is important to note that these funds are required by the amendment to only be allocated towards education and transportation programs.

These phases have already occurred for the FY26 budget, and now we await conference committee debates where both branches negotiate to reconcile the differences in the respective versions. The plan is then submitted to the Governor for final sign-off and implementation.

Proponents of the amendment forecasted that it would bring in an additional $1 billion in revenue yearly for the state. In year one, it did exactly that. Surprisingly, revenue figures actually increased year-over-year, with $1.3 billion collected in FY24 and $1.95 billion in FY25.

A recent report from the Institute for Policy Studies found that, “the number of millionaires by net worth increased by 38.6 percent from 2022 to 2024, from around 440,000 people in Massachusetts to more than 612,000. Their collective wealth also grew significantly, from $1.6 trillion to $2.2 trillion, or 37.7 percent.”

Programs that have seen consistent funding from Fair Share Amendment revenue include state colleges and universities, state scholarship programs, the MBTA (through capital investments), major bridge and highway repair programs, and regional transit authorities, among others. Through the use of a supplemental budget, the state has been highly effective at distributing these funds, avoiding delays often seen with large pieces of legislation or the general fund debate. Now, we are beginning to see tangible results, specifically with the MBTA reforms.

FY26 Spending

In its current form, there is no language stipulating that the money distributed by the amendment must be allocated equally to education and transportation. While this allows for more flexibility, it can also create tension as disagreements over state priorities percolate.

Each year, the state budget is used as a crucial mechanism for the Legislature to signal its priorities for the year, both through funding and passing legislation. Despite being limited to two areas of funding, the Fair Share Amendment has grown to serve as a way to signal priorities as well.

Unlike past years, the FY26 proposal for Fair Share spending has led to disagreements between the House and the Senate on what category of distribution to prioritize, education or transportation. This year, the House has remained committed to its support for transportation programs as House leadership views the MBTA as an economic engine for the state.

The Senate proposal, however, includes less funding for transportation, with a more equal split between sectors. Senate leadership has signaled a commitment to “regional equity,” highlighting investments that touch areas outside of Greater Boston, particularly salient for Senators as they have larger districts with a greater percentage of Senators serving districts outside of Greater Boston than the population-based House.

As the FY26 budget enters Conference Committee negotiations, it will be interesting to see what types of concessions each branch will give to support their priorities in the Fair Share allocation plan.

What Does the Future Hold?

Should revenue from this amendment continue to be maintained, or even grow further, there are many quality options that the State could fund to continue this work of building strong transportation and education infrastructure across the Commonwealth.

For example, the funding could be used to support the remediation of the Cape Cod bridges, a multi-billion-dollar project. A potential unifier for House and Senate leadership in transportation spending could be a robust East-West rail system, connecting cities and towns like Springfield and the Berkshires with their Eastern neighbors and Boston. Senate leadership has also advocated for several years for programs providing free community college for all Massachusetts residents, which could be supplemented by funding from this amendment.

The question remains: how can we be sure this funding will continue to flow? As long as the state’s high earners do not begin leaving at an accelerated rate, revenue should remain unaffected. The state must also prioritize economic and municipal improvements into areas like public transit, public schools, and revitalized business districts, that attract businesses, and their high-earning employees, to work and live in the state.

The implementation of the Fair Share Amendment has been an interesting case study into tax proposals focused on exclusively on high earners. Additionally, the requirement to allocate funding to education and transportation spending ensures these funds are distributed to clearly defined areas and to causes where the state is in desperate need of funding.

While a controversial amendment to our state’s constitution, the programs funded by this amendment have been positively affected. We hope the state can continue to reinvest back into our communities using this revenue and other tax revenue gathered annually.