November 9, 2001
Fiscal Fright: Tax Cuts Can Move Forward Without Fear of Budget Cuts
study, released today by the Beacon Hill Institute at Suffolk University
shows that Massachusetts can weather the current fiscal crisis without
cutting spending and without postponing planned tax cuts. Last
year, Massachusetts voters overwhelmingly approved a ballot measure
that called for a reduction in the state income tax to 5% by 2003.
Postponement of this tax cut would be unnecessary and would, moreover,
deepen the recession into which the state is currently sinking, according
to the study.
the state has sufficient funds in its coffers to manage this impending
fiscal crisis without having to cut spending or ask its citizens to
tighten their belts. Making prudent use of the stabilization funds
and prior surpluses, the state can continue to spend at current levels.
Even if spending grows at an annual rate that exceeds inflation between
FY01 and FY06 these funds will be sufficient.
findings show that it is unnecessary to halt the income tax cuts currently
in progress. Further, BHI·s State Tax Analysis Modeling
Program (STAMP) shows that halting the tax cut would be unwise.
Postponing the tax decrease that is scheduled for next year would cost
the state nearly 33,000 jobs and $1.3 billion in payrolls. Such
a measure would serve to push the state further into economic crisis
while only funding 1.8% of spending in FY 2003.
shows that in its first year alone, the tax cut has brought 22,000 new
jobs to the state and increased payrolls by $864 million. At full
implementation, when reaching 5% in 2003, the tax cut will have created
84,000 jobs in the state.
for deep spending cuts and for postponement of the scheduled tax cuts
amount to a panicky and unproductive reaction to a revenue slowdown
that is in fact manageable with modest adjustments in the state spending
plans," observed Executive Director David G. Tuerck, PhD.
Hill Institute at Suffolk University is a nonprofit, nonpartisan economic
research organization. It applies state-of-the-art economic methods
to the analysis of current public policy issues.
copy of the BHI FaxSheet, "Staying the Course: No Need for Fiscal
Fright in Massachusetts," call BHI at 617-573-8750 or e-mail firstname.lastname@example.org.
Revised formatting on
2/24/05 12:01 PM