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For Immediate Release: October 25, 2000

Contact: Frank Conte, Communications 617-573-8050; 8750 fconte@beaconhill.org

Massachusetts Can Both Cut Taxes and Fund New Services and Programs, Study Shows

Massachusetts can cut its personal income tax rate to 5% and still expand services and programs, according to a just-released 40-page study by the Beacon Hill Institute at Suffolk University. Even in the event of a recession, the state can expand services and programs by 17.3% over the next five years and do so without depleting its reserves.

On November 7, voters will decide whether to approve ballot question 4, which would reduce the state's personal income tax rate from 5.75% to 5% by 2003.

Under current law and without any tax cut, state spending can be expected to rise by 8.1% annually, from $21.4 billion in calendar year 2000 to $31.6 billion in 2005. Given inflation of 3%, the state will expand services and programs by 27.5% over the five-year period without any tax cut.

The BHI study finds that the tax cut would require only a decrease in the growth of state government services and programs. No cuts would be required.

• With the tax cut and no recession, the state will still be able to expand spending at an average annual rate of 6.5% over the next five years. In no year will the increase in spending fall below 5%. The state will be able to expand services and programs by 22.5% over the five-year period.
• With the tax cut and a recession, the state will have to slow spending growth only to 6.2% annually over the five-year period. The state can expand services and programs by 17.3% over the five-year period and do so without depleting its reserves.
• The tax cut will confer substantial economic benefits. By 2003 it will create: 79,354 new jobs; $800 million in new business capital, such as factories, computers and office space; and $6.17 billion in new payrolls.

David Tuerck, BHI Executive Director and Chairman of the Suffolk University Department of Economics, said, “Massachusetts can have this tax cut and the substantial economic benefits it will confer and still generously expand state services and programs. Not a single service or program will have to be cut, not even if there is a recession.”

The Beacon Hill Institute at Suffolk University is a nonprofit, nonpartisan economic research organization. The new study, Massachusetts STAMP and Question 4, shows how the state can expand both the private sector and government as it implements the tax cut. The BHI FaxSheet, “Economic Answers to Question 4,” summarizes the study's results and is available at . Copies of the full study or the BHI FaxSheet can be obtained by calling BHI at 617/573-8750.

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Posted: 10/25/00
Revised format on: 2/9/07 17:34
Webmaster: Frank Conte
e-mail: fconte@beaconhill.org

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