10/24/2019

Opinion: The Massachusetts Tax-Cut Miracle

As you’ve probably read, maybe even in this column, cutting taxes to stimulate economic growth hasn’t worked out so well for Kansas. In fact, things seem to only be getting worse for the state, with nonfarm payroll employment falling again in June, according to data released last week by the Bureau of Labor Statistics. Kansas is the only state in the nation with fewer payroll jobs than it had six months ago; over the past 12 months, only Wyoming shares that dubious distinction.

It’s enough to make a person think that lowering state taxes doesn’t bring faster economic growth. But focusing too much on Kansas can be misleading. It’s just one state, and not all of its current economic troubles can be attributed to the decisions made in Topeka over the past five years. Also, we may not be giving things enough time to play out. So let’s take a look at another state that has been cutting taxes for a while — Massachusetts. Yes, Massachusetts.

From 1977 through 2012 (the most recent year for which the Tax Foundation, a business-friendly think tank, has calculated tax-burden data), the state and local tax burden faced by Massachusetts residents fell from 12.3 percent of income to 10.3 percent. That may not sound like much of a decline, but over that period only three states — Alaska, North Dakota and South Dakota — saw bigger decreases. Massachusetts, which had ranked among the top three or four states for tax burden in the late 1970s and early 1980s, has since 2000 oscillated around 12th place.

Massachusetts ranks right in the middle of the pack, meanwhile, on the Tax Foundation’s Business Tax Climate Index, which attempts to measure “which states’ tax systems are the most hospitable to business and economic growth.” It scores much better on both tax climate and tax burden than other populous Northeastern states, such as Connecticut, New York and New Jersey (it scores marginally worse than Pennsylvania). 

So how has the state’s economy performed compared with the rest of the Northeast 1since the early 1980s? Pretty impressively, actually.

Massachusetts hasn’t just created more jobs, it has apparently created better jobs, with per capita personal income rising from below that of the rest of the Northeast in 1980 to 11.6 percent higher in 2016.

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