Tax policy debates are about how we pay for the things we do together for our communities, our families, and our economy. Working together through government allows us to accomplish things that are vital to us as a Commonwealth and that we can’t do alone. This includes the roads, subways, and buses that help us get around and allow our economy to function; the schools that educate our children and strengthen our future workforce; the police and fire protection that keep our neighborhoods safe; the environmental safeguards that maintain our clean air and water; and the safety net that protects us when we fall on hard times.
About 15 years ago, at the height of the dot-com bubble, our state made tax policy choices that have shaped state policy ever since. At the time, our economy was so strong that it seemed we could cut taxes dramatically with no consequences. The state enacted a series of cuts to the income tax that are now costing us close to $3 billion a year. We cut the tax rate on most income from 5.95 percent to 5.3 percent, costing over $1.5 billion. We cut the tax rate on dividends and interest from 12 percent to 5.3 percent, costing about $850 million. We increased the personal deduction to $4,400, costing $550 million.