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For Immediate Release:
November 9, 2001

 

Contact: Frank Conte, Communications
617-573-8050; 8750

Overcoming Fiscal Fright: Tax Cuts Can Move Forward Without Fear of Budget Cuts

A new 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. 

BHI finds 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.

BHI·s 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.

STAMP 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.

"Calls 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.

The Beacon 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.

For a copy of the BHI FaxSheet, "Staying the Course: No Need for Fiscal Fright in Massachusetts," call BHI at 617-573-8750 or e-mail fconte@beaconhill.org.

Posted on 11/9/01
Revised formatting on 2/24/05 12:01 PM

 

 

 

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