Massachusetts suffered dearly in the Great Recession, but not as badly as some places. Realizing that cuts to state funding and services — ie. jobs — would exacerbate the economic damage, the Commonwealth raised revenues. That was due to the courage (!) and sober dutifulness of our state leaders at the time, who raised the sales tax from 5% to 6.25%. Credit goes to then-Senate President Therese Murray; Speaker Robert DeLeo, and Governor Deval Patrick.
Here we are again, and it’s even worse. Massachusetts is looking at a revenue shortfall of some $6 billion.
These 91 economists, from a variety of Massachusetts institutions, are calling for use of our rainy day funds of $3.5 billion; and income and corporate tax increases of 1% each, which would raise $2.5B and $180 million respectively. While there is an economic cost to raising taxes, the cost of losing jobs and services is far, far worse.
Economic theory and historical experience show that spending cuts are more harmful than tax increases during recessions. States and localities spend most of their budgets on health, education, public safety, public transformation, and safety net programs. Cutting from housing, public transportation, and healthcare removes spending from the economy when it is most needed and from the people who need it the most and now have been disproportionately affected by COVID-19. Cutting local aid to cities and towns for police and fire protection, parks, and public works erodes public safety and infrastructure. While reducing funding for early education, K-12 and higher education reverses our long-standing investment in human capital—including recent new commitments—with long-run consequences for worker productivity and economic growth.Via email from MassBudget: https://scholars.org/sites/scholars/files/MA_Economists_Letter_05262020.pdf
Austerity is not the answer. Let’s keep people in their jobs as long as we possibly can.