Tuesday, December 30, 2008

Raise Taxes

Despite whatever the Governor and Speaker think, we aren't going to and can't cut ourselves out of this budget mess. We're only going to need to cut more and more and more. Where does it end?

A small increase to the state's income tax, say .3%, would not only be unnoticeable to the average taxpayer over the course of an entire year, but would end this state's fiscal crisis. Our tax burden, as a state, is below the national average in a state that is one of the most expensive places to live in. Either we have to become a crappy state, which will make us poorer in the long run, or we have to suck it up and contribute just a little more to our state's finances.

There's around 6.4 million people living in this state and the average taxpayer earns around $42k. Raising taxes by .3% would bring in about $900 million dollars. That, alone, would nearly solve our budget gap for this year and maybe the next. Couple that with reducing the cost of health care and not only would our structural deficit finally end, but we could start to think about working on all the projects we've been neglecting in this state for decades - the kind of economic stimulus that could not only help in a desperate economy, but help the parts of the state that never felt the boom years to begin with.

[Note - I missed a decimal point in my original math. It is now fixed. I made some changes to the blog to account for a smaller pool of funds. But my general point remains: we can't just cut ourselves out of this mess - it's going to take a varied approach, finding funding efficiencies, like in health care or regionalization, as well as raising revenue.]


Jeremy Marin said...

I think there may be some issues with your math. Tax revenue is expected to fall, precipitously, which is one of the reasons that we're in this mess. (See: http://www.reuters.com/article/companyNews/idUSN1551969520081215?rpc=11)

"Massachusetts could face a revenue drop of as much as 11 percent over the next two years as the U.S. recession drives down personal and corporate income, eroding the state's tax base, according to two private forecasts released on Monday."

Kathleen Norbut said...

I protest a single cut to local aid before the legislature digs into it's own budget and salaries for reductions.

Lead by example.

And grow some t-fortitude and make a decision to raise the needed revenues.

No casinos, No corruption, No more patronage jobs and No Cuts to Local Aid.

Hi Ry.

Anonymous said...

Much like the issue you raised regarding debt and the newspapers, why are states and municipalities different?
If families should strive to be debt free and live within their incomes, shouldn't states and municipalities as well?
Municipalities can see that a new school or whatever will be needed in 5 years. Are there any in the state that are debt free? Are they maximizing their use of the stabilation fund? No! Much like the state. Let's live with the credit card mentality, borrow to the max for things like the Big Dig that was totally mismanaged and no one wanted to listen to those who spoke against it,and wonder how we got here.
The concept of state pensions began at a time when workers were paid less than the private sector. That's no longer true, but the pensions and benefits haven't retracted to reflect reality.
Municipal workers receive 2 annual pay raises and healthcare benefits during retirement offered no where else. Let's talk about reality and fairness before we talk about raises taxes to fund inequity that needs to be discussed.
And maybe we need to disclose the benefits received by state legislators as well. Why?

Ryan said...

You're right, Jeremy. I missed an entire decimal!

It would have to be a .3% raise, which would get nearly a billion, which will buy us enough time to come up with a thoughtful, reasonable, balanced approach to solving our budget problems (which probably means a progressive income tax coupled with severely attacking the high cost of health care.

Anonymous said...

We need some long range planning to bring down costs in the future. Any state worker hired after Jan 1 2009 should not get a pension when they retire, they could have the state create a 401k account and match maybe the first 3%. Current workers would be grandfathered in the current system. Many private companies (mine included) have changed over to this system and long term obligations are going to drop tremendously. If you drive a car by only looking at the ten feet in front of you you're going to crash, same with a household or state budget. Don't look far enough in the future and we'll always have these times of crisis.

Ryan said...

No, pensions are a great thing. This stock market showed exactly why 401ks are dangerous and a horrible policy across this country. I won't disagree that the pension system needs some tweaks, but we can't solve our state's problems through crushing retirements.

The cost of health care, on the other hand, is killing this state - and there's so much price gouging there (as Partners and Blue Cross have made evident) that it's not even funny. We could save a lot of money as a state through tackling the high cost of health care. That alone would save this state's fiscal outlook.

Anonymous said...

It's a small thing but Ryan defend Deval's creation of a new job which pays $120,000 for someone to be "director of real estate services". It's a new position, and guess what it went to one of Deval's neighbors and a campaign contributor. Hasn't the Division of Capital Asset Management been doing this all along? No let's raise taxes so we can fund this new position.

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