Tuesday, January 29, 2013

Massachusetts doubles down as a high cost, no growth state

Republican Charlie Baker absolutely nails it on the growth gap between Conservative low income tax states and Liberal high income tax states. The numbers are staggering and Liberal Governor Deval Patrick is going all in for massive tax and spend in his no growth Massachusetts. A sure fire recipe for a train wreck in the Bay State. Couple that with draconian leftist gun control initiatives look for further population migration out of the state. I know I'm personally fed up!  

Mass. pays economic price for its high rates

Two weeks ago, Gov. Deval Patrick proposed to raise over $2.5 billion in new taxes, including a 20 percent jump in the income tax - the largest in state history. Since then, most of the discussion has focused on the politics of such massive tax increases, and not on the economic implications of such a significant hike in the cost of government. The over-arching message seems to be that tax rates don't matter, the size of government doesn't matter, and the machine that is state government is already doing a perfectly fine job of maximizing the use of state tax dollars. All it needs to ramp up its performance - and the commonwealth's along with it - is a lot more money.
In short, the debate has already presumed that there is no economic development price - no "growth" price, to use the governor's words - to be paid for such a huge increase in taxes - just a political one. Recent history would suggest otherwise.
Over the course of the past decade, the nine states with no personal income tax benefited from population growth, GroChart 150ss State Product growth, job growth, and tax revenue growth that far exceeded the national average. The nine states with the highest personal income tax rates lagged the national average in all three categorie
s, and it wasn't close. (See chart.)

Some might respond to this 
 by saying that lower-cost states benefit from being, well, lower cost, and it's important to adjust these numbers for personal income. OK. If one does the same analysis 
on the  same criteria, and divides the country up by state and local tax burden as a percent of personal income, what happens? The nine states with the lowest state and local tax burden as a percent of personal income out-perform the national average, and also out-perform the states with the highest state and local tax burden, as a percent of personal income.

Are these the only factors that matter in assessing and measuring economic performance? No - but it should give policy makers and others pause. The notion that Massachusetts operates in a vacuum - and that its competitive position relative to other states has nothing to do with its tax, fiscal and regulatory policies is short-sighted. 
And economically, we're not exactly breaking records on any of these measures, either. We have underperformed the national average across all of these benchmarks for the past decade as well. Our jobs market has been flat for over 10 years - we had more jobs here in 2000 than we have today - and we have had virtually no population growth for a decade, finishing at or near the bottom of every study of net migration in and out of the 50 states for the past 10 years.
Moreover, as the researchers at MassInc pointed out in their study of the Massachusetts economy from 2000 through 2010, job stagnation has done tremendous damage to working people. We used to be one of the most "equal" states in the nation, in terms of the spread between our top wage earners and our low wage earners. Today, after years of mediocre job, economic and population growth, we are second only to New York - another no growth, high-cost state - in terms of our inequality. Put another way, every state in the nation, except New York, has a smaller spread between its top wage earners and its low wage earners than Massachusetts.

Six years ago, CNBC - the preferred business climate poll of the folks on Beacon Hill, because it gives heavy weight to educational achievement - ranked Massachusetts No. 12 overall - high cost, but smart, to put it simply. Last year, we ranked 28th - which came as a shock to policy makers on Beacon Hill. One summed it up perfectly by saying something like, "I don't understand it - we're not doing anything now that's any different than what we've been doing." Exactly right. We haven't been making our state more affordable, other states have been doing so, and working people in Massachusetts have been paying the price.
As the debate on the governor's proposals moves forward, I would hope to see a little less focus on the politics of voting for big tax increases and a little more focus on whether or not the governor's tax proposals will make it easier or harder to find work in Massachusetts, and grow our economy. It's pretty easy to talk about all the stuff public officials want to do with other people's money, and the gamesmanship associated with taking it from them, but this debate is about much more than that.
This discussion, to paraphrase the governor, is really about what kind of state we want to be. We can follow his lead and double down on our current status as a high-cost, no-growth state - and hope, somehow, to defy recent history - or we can find ways to get the job done that aren't built on the faulty proposition that there's no price to be paid for making this very fine place even less economically competitive than it is today.
Charlie Baker was secretary of Administration and Finance in the Weld administration and the Republican candidate for governor in 2010.

1 comment:

  1. We don't have heaps of different pointless payroll 2013 tax brackets.We don't have lots of special tax breaks for special interest groups!!!. Good tax rebates for donations to charities. Company tax is 28% and hopefully lowered to 25% soon. A basic capital gains tax of a simple flat rate would be a good addition