In The Arena – My Response to Gov. Patrick’s Revenue Proposal

New Revenues, Needed Investments

The talk everywhere in the State House — in offices, hallways, and alcoves — is all about Governor Patrick’s proposal to raise $1.9 billion in revenues in order to make investments that would improve our roads, rails, and bridges and also invest in education at all levels:  pre-kindergarten, K-12, and higher education.  But before we respond to the Governor’s proposal, it’s important to ask some fundamental questions.  Do we actually need to make these investments?  Are they the right targets for new funding?  Do we need to raise revenues, or in other words, can’t we wring out enough savings through reforms to pay for what’s needed?  What effect will raising taxes have on the economy and jobs?

Do we need to make these investments? 

We need to invest in our transportation system.  Because so much of our transportation focus and funding over the past 25 years was plowed into the Big Dig, the rest of the state’s roads and bridges were poorly maintained.  We deferred maintenance for decades.  Each day, we drive over 300 structurally unsound bridges.  Moreover, the Big Dig buried our transportation agencies in debt, particularly the MBTA.  To maintain our transportation system, we need about a $1 billion in new revenues.

On education, all three levels deserve more.  Research shows that pre-K schooling yields better students, but over 30,000 can’t get early ed.  For K-12, our school districts are desperate for more state funding; the Great Recession set us back.  And with over $1 trillion in student debt throughout the country, higher education needs resources to make college more affordable for all families.

Wise investments in transportation can lead to new jobs and economic growth.  Educating more of our children will give them brighter futures and make Massachusetts more economically competitively.

Are transportation and education the right targets for new funding?

Yes, but frighteningly, there are several other important needs:  clean and waste water infrastructure;  health care for legal, non-citizens that the federal government won’t pay for; pensions and retiree health care, given our lower than expected investment returns for those trust funds; and the impending liabilities and costs associated with the state drug lab scandal.  All together, these needs amount to over $1 billion as well.

Do we need to raise new revenues; why can’t we wring out enough savings through reforms to pay for what’s needed?

Before we can ask citizens to pay more taxes and fund more government, we need to ensure that we making good decisions with your tax dollars, and demonstrate that we have crafted and implemented reforms that make government as efficient, effective, and transparent as possible.

Over the past several years, we have accomplished this.  We will continue to look for more savings, of course, but the legislature and governor have already initiated all the big reforms that were available, which have yielded billions in savings, and will yield billions more.

  • Over $500 million in transportation spending starting in 2009 by streamlining transportation departments, eliminating duplicative management, and reducing health and pension benefits for transportation employees;
  • Over $5 billion from a series of pension reforms in 2008 and 2011; and
  • $100 million by streamlining the state’s economic development agencies in 2010.

Going forward in the health care arena, we expect that the cost cutting reform law we passed last year will save families $2,000 annually (and small businesses up to $15,000 per employee) over the next 15 years.  Moreover, we expect to pass OPEB (Other Post-Employment Benefits) reform this session, which will save taxpayers $15 – $20 billion over the next three decades.

I welcome your thoughts on other big-dollar savings ideas that we can implement.

What effect will raising taxes have on the economy and jobs?

As stewards of taxpayer dollars, we in the legislature understand the essential balance between taxing citizens to invest in areas where government has a clear role, and allowing citizens (and businesses) to retain more money and spend it the way they want.  Ultimately, public and private should be making smart investments.  Government should invest, for example, in transportation, education, water infrastructure, and a temporary safety net for citizens.  Government should not, on the other hand, tax so much as to unwarrantedly hinder individual and business investment in such areas such as R&D, new products, inventions, necessary services, and sound real estate developments, among other spending choices.

Investments in transportation and education generate a good return for taxpayers in terms of economic growth, job opportunities, quality of life, and long-term sustainability.  In macroeconomic terms, the multiplier effect for spending in both these areas is positive.  Many tax cuts, in contrast, have negative multiplier effects.

More specifically, perhaps we can all agree that the public and the private sector can invest together to help the more than 200,000 unemployed Massachusetts citizens obtain the skills they need to apply to the more than 120,000 job openings in the Commonwealth.

Having addressed the major questions about whether new revenues are needed, we can now turn to how much revenue is needed, and how best to raise it.  Here again, I welcome your input.  Options being actively discussed at the State House include: removing income and corporate tax deductions; increased business taxes, a progressive carbon tax (which I authored); a gas tax increase; open road tolling; removing sales tax exemptions on candy and soda; raising sales taxes on tobacco, guns, and ammunition; and income tax increases.

We’ll be debating these investments and revenues over the next few months, and I look forward to hearing your thoughts so that together, we can make the right decisions.

 

 

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