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For Immediate Release:
October 15, 2010
12:0
1 a.m. EST

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

The Other Side of Question 3: More Jobs and Less Unemployment

(BOSTON ) – A new analysis of Question 3, the sales tax rollback, by the Beacon Hill Institute (BHI) shows that the tax cut would create 27,199 private sector jobs, increase annual investment by $73 million and raise wages by $1.03 billion.

Question 3, which will appear on the November ballot, would reduce the sales tax from its current level of 6.25% to 3%. Opponents say that passage of Question 3 would devastate what they believe to be under-funded public services such as education and public safety. Supporters of the measure claim that a reduction in the sales tax would generate economic activity while forcing the state to cut what they believe is wasteful spending. The analysis is an attempt to quantify the economic effects of the passage of Question 3.

“Much of the discussion of Question 3 is based on a diet of fear, highlighting only the loss of state revenues and budget cuts, rather than the upside to the state’s economy,” said David G. Tuerck, BHI’s executive director. “Opponents utterly ignore how the sales-tax reduction would help staunch the outflow of business to New Hampsire and bring in new business as well from neighboring states that impose higher sales taxes.”

Using its State Tax Analysis Modeling Program (STAMP), BHI found that the expansive effect of the sales-tax reduction on the state economy would cause the revenue loss to be much smaller than the $2.5 billion loss predicted by opponents. When the “dynamic” effects on the state economy that the measure would produce are accounted for, the revenue loss would be only about $2.08 billion. The model found that this loss in revenue would require the public sector to shed 9,885 jobs.

The analysis also noted how state revenue growth has outstripped personal income growth in the Commonwealth since 1999. “The problem clearly has been spending, not tax cuts which were minimal since 2000,” said Tuerck.

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