Almost a year ago, writing in this space, I warned against
the feeling, then nascent, that Gov. William Weld had won
the war against runaway state budgets.
reason for this pessimism was, odd as it may seem, my expectation
that within a year or so the state would begin to recover
economically. The authors of runaway budgets - having fallen
temporarily silent since the Dukakis days - would come back
to life and renew their campaign to soak up every penny in
new tax revenue that the growing economy would produce.
here we go again.
Gov. Weld proposed a budget of $14 billion for fiscal year
1993, up from the budget of $13 billion the legislature adopted
last year. Some legislators, encouraged by an unexpected spurt
in tax revenues, are pushing for a budget in excess of $15
Ways and Means Committee Chairwoman Patricia McGovern (D-Lawrence)
accuses the governor of being "disingenuous" for
proposing tax reductions whose fiscal '93 cost to the treasury
would be less than $200 million or about 1.5 percent of the
is being disingenuous all right, but it isn't the governor.
Two years ago, the tax-and-spend lobby successfully opposed
a ballot measure that would have cut state taxes by more than
$2 billion. The measure, it was said, went "too far."
Now we learn that a tax cut of one-tenth this amount likewise
goes too far.
taxpayers should get the message: Barring political change
that extends well beyond the executive branch, there will
be no significant tax cuts in Massachusetts. What there will
be, however, is a steady rise in spending.
might think that this is perfectly acceptable. As long as
tax rates don't go up, what is wrong with the state's appropriating
the fiscal dividend produced by a growing economy to meet
the many "needs" of state government? The trouble
is that the same people who bring us ever-rising state budgets
have plans of their own for tax "reform."
are already busy with proposals to institute a graduated income
tax, to force corporations to make public their tax returns,
and to make it easier for municipalities to bypass Proposition
21/2. There is also the question of whether the promised benefits
of another billion dollars or so of state spending are really
worth the costs in terms of the amenities sacrificed by taxpayers
who pay the bill.
more fundamental is what we might call the silent loss imposed
by ever-rising state budgets. Textbook economics tells us
that if we penalize people for working or saving, they will
do less of it.
we tax them for shopping in Massachusetts, they will shop
in New Hampshire. If we tax them for dying in Massachusetts,
they will retire to Florida. Taxes distort economic choices
and , in the process, impose a loss, measured in reduced personal
income and fewer jobs, on the economy. This loss is "silent"
because no one lobbies against it the way the teachers' union
and other special interests lobby for increased spending.
But it is real, nevertheless, and makes itself felt in a reduced
standard of living for all of us.
voters could, if they wanted, eliminate this "silent
loss" by holding spending (in real, inflation-adjusted
dollars) constant and by reducing tax rates. That's because
unchanged tax rates produce growing revenues in a growing
Beacon Hill Institute at Suffolk University predicts that
Massachusetts tax revenues will be about $9.2 billion in the
current fiscal year. Assuming no change in tax rates and adjusted
for inflation, they will reach about $9.6 billion in fiscal
'93. If, as we expect, the national and state economies continue
to grow thereafter by about 3 percent a year, the comparable
figure for fiscal 1999 will be about $11.7 billion.
Suppose that, instead of appropriating for its own purposes
the revenues produced by this growth, the legislature cut
taxes by just enough to keep tax revenues and, therefore,
state spending (again adjusted for inflation) at about their
'92 levels. We estimate that the legislature would, by this
action, add more than $1.5 billion to Massachusetts personal
income and create more than 25,000 new jobs by fiscal '99.
These gains are not transfers from public- to private-sector
activities, but gains to the entire economy that will be sacrificed
unless tax rates are cut.
in the rush to spend, there has been no attention by the legislature
to the long-term silent effects of taxes. The focus is, instead
on wholly irrelevant short-term considerations like state
bond ratings and the exact amount of tax revenue for fiscal
By almost deliberately underestimating '93 tax revenues, the
legislature is setting itself up for criticism again next
year for its failure to fund "needed" programs when
the money was there all along.
Last year's warning is, therefore, proving prophetic. Recognizing
that tax reduction once tried, might catch on with Massachusetts
voters, the big spenders continue their mainly successful
campaign to resist every proposed tax cut that makes its way
to the legislature or ballot box. Meanwhile, taxpayers suffer
in silence as the governor's economic growth plan is put on
hold. It is not a pretty story, but someone has to tell it.
G. Tuerck is executive director of the Beacon Hill Institute
and chairman and professor of economics at Suffolk University.
This article first appeared in The Boston Herald on
June 7, 1992.
Format revised on: Thursday, February 1, 2007 4:21 PM
revised on May 12, 2005 12:26 PM