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Testimony for the House and Senate Ways and Means Committees, the Joint Committee on Revenue, and the Executive Office of Administration and Finance Economic Roundtable
We’re clearly in a budget crisis. Which is extremely troubling at this time, when we need real, comprehensive relief for families and individuals — so many of our neighbors, young and old, are struggling with accessing basic necessities and keeping healthy and well.
Our Commonwealth’s budget – how we raise revenue through taxes and fees, and how we spend that revenue – is the clearest picture of our shared values. Considering the revenue side picture is crucial, but the other side of the ledger is just, if not more important.
Massachusetts could face a $5 billion budget hole; Baker administration takes tax hikes off the table for now
The Senate and House chairmen of their respective chambers’ budget committees, Michael J. Rodrigues and Aaron Michlewitz, prepared to host a virtual roundtable with experts to determine how dire Massachusetts’ financial picture is.
“There’s a budgetary crisis happening,” said Marie-Frances Rivera, president of … Massachusetts Budget and Policy Center.
The original unemployment system was limited in various ways and covered only about half of the actual American workforce, according to Phineas Baxandall, a social insurance expert at the Mass. Budget and Policy Center. The expansion Congress passed during the shutdown made payments last longer, made them much more generous, and allowed more workers to qualify, including part-time workers, independent contractors, and the self-employed.
“The Commonwealth should pair limited use of borrowing and withdrawals from the Rainy Day Fund with new policies to increase revenue, thus avoiding budget cuts which would deepen and prolong the recession,” says the report, which came out today. It specifically argues against relying mostly on borrowing to plug holes in the budget, and cites a 2015 study by the Congressional Budget Office looking at the Great Recession, which found that “for every additional dollar of revenue raised from taxes (which are used to support public spending during a recession), economy activity drops by less than a dollar.”
In other words, MassBudget contends, raising taxes in the last economic downturn proved to have a net positive impact on the economy. Of course, that idea is sure to meet resistance from the state’s wealthier residents who will likely shoulder the burden of those taxes, and it will be up to lawmakers to decide both who will benefit from the recovery from the pandemic, and who will have to pay for it.
In a report published Tuesday, the left-leaning Massachusetts Budget and Policy Center argues that policymakers can maintain state spending on public services and programs despite the devastating financial impacts of the COVID-19 pandemic if they limit deficit financing, tap into the state’s $3.5 billion reserves and adopt “new policies to increase revenue.”
“Collecting additional progressive taxes to protect Massachusetts public spending against cuts will advance economic recovery by ensuring that more funds will be spent now on goods and services in Massachusetts. This is a clear lesson from the Great Recession,” Phineas Baxandall, MassBudget’s senior policy analyst who wrote the report, said. “A 2015 study by the Congressional Budget Office examining the Great Recession found taxes have a net positive impact on the economy when they are used to support public spending during a recession. For every additional dollar of revenue raised from these taxes, economy activity drops by less than a dollar.”