Revenue Reform and the Budget

One of PDM’s top priorities for the next year is enactment of a major reform of the state’s tax system. 

Progressive revenue reform must fulfill two goals:  First, it needs to make our tax system fairer by reducing the share of the tax bill paid by households of modest means and shifting more of the cost to those with the greatest ability to pay.  And second, it needs to expand the total revenues generated, so that we can afford the programs and services on which we all rely.

I’ll write more about the fairness issue in a future entry.  For a great primer on the topic, take a look at Citizens for Tax Justice’s “Who Pays?” [link: http://www.itepnet.org/whopays.htm]

Here I want to talk a bit about the need for additional revenues to support critical services.

The legislature is currently wrapping up a budget for next year that basically lives within current revenues.  And, as the economy (hopefully) recovers, tax revenues will naturally expand.  So, why do we need more revenues?

Two crucial answers:

First, the only way that current budgets are living within current revenues is by continuing the pattern of deep cuts in vital programs that have gotten us through the last several years.  State aid to local communities remains far below its levels from a few years ago.  To see the impact on your own community, go to the website for the Coalition for Our Communities (the coalition for tax reform, of which PDM is a proud member). [link: http://ourcommunities.org/]

And similar cuts have severely undermined virtually all of the services and programs provided by state government, from our state universities and colleges to our environmental protections to health and social services for our most needy citizens.  For an excellent overview of the impacts, take a look at this report from the Massachusetts Budget and Policy Center.  [link: http://www.massbudget.org/report_window.php?loc=Final_Cuts_20July_2011.html]  To see the impacts on particular programs, spend some time looking at MassBudget’s Budget Browser here. [link: http://browser.massbudget.org/].

Second, looking into the future, the state’s current revenues are rapidly going to prove inadequate, even with growth from economic recovery, to maintain even our diminished current level of services and programs. 

The Patrick administration last month released a careful five-year forecast of the state’s revenues and the costs of continuing programs at current levels.  They found a substantial and growing gap, because program costs are growing faster than revenues.  So, without new revenues we face a continuing process of year-by-year cuts in programs that are already at levels far below needs.  The shortfall within 5 years will be nearing $2 billion annually.

The administration’s report is here. [link: http://www.mass.gov/anf/press-releases/first-long-term-fiscal-policy-framework-published.html].  If you don’t have the patience for a pretty dense (but very well done) analysis, take a look at Barry Bluestone’s helpful summary of it, here.  [link: http://www.northeastern.edu/dukakiscenter/fiscal-forecast-for-massachusetts/]

This situation is largely the consequence of the billions of dollars in tax cuts enacted in Massachusetts over the past 20 years.  In fact, since 1977, Massachusetts has reduced its state and local taxes more steeply than any other state.  As a result, Massachusetts state and local taxes are now far below the national average, ranking us 33^rd among the 50 states. 

The time has come to restore some of the revenues that we’ve given up, so that we can preserve and start to rebuild the programs and services that provide opportunity for our citizens and that protect our quality of life.