The question invariably comes up in most conversations I have with local business leaders these days: Is Massachusetts losing its economic mojo?
We’ve long taken justifiable pride and comfort in the state’s status as a world leader in higher education, medicine, and biotech. Our tech and finance industries punch above their weight. And the Massachusetts workforce is one of the most highly educated and skilled in the nation.
But complacency is a real risk. It’s easy to assume that the successes of the past 40 years will continue in the years ahead. Yet as they warn, in the investment world, past performance doesn’t guarantee future results.
The strong headwinds facing the state are the focus of a new report by the Massachusetts Taxpayers Foundation that paints a concerning picture.
Voters’ approval of the “millionaires tax” in November has put the issue of the state’s economic competitiveness back on the front burner.
Like most anything else, opposing viewpoints break down largely along political lines.
Fiscal conservatives are arguing that the 4 percentage-point surcharge on incomes above $1 million will accelerate the loss of people, jobs, and wealth to other states.
Progressives counter that the losses will be minimal and more than offset by the additional revenue generated by the millionaires tax, which will be used to make much-needed investments in education and transportation.
Both sides have plenty of studies and data to choose from to back up their positions. Last week the conservative Pioneer Institute released an analysis of 2021 IRS data that focused on the sharp rise in net migration of taxpayers out of the state.
The Massachusetts Budget & Policy Center has estimated that fewer than seven in every thousand households would be covered by the millionaires tax.
Of course, the Massachusetts Taxpayers Foundation has its own (largely pro-business) agenda. It has warned that the millionaires tax would hurt the state’s business climate. And it has said the state would benefit from tax relief on short-term capital gains and the estate tax, along with measures to help seniors, renters, and low-income households.
But I like its latest report — a package of charts — because it highlights the full range of challenges facing the state. Here are some of the data points I found noteworthy.
On housing costs:
- Massachusetts had the lowest apartment vacancy rate in the country at 2.8 percent in 2022.
- Boston had the second-highest (after New York) median asking rents in March, $3,839 a month, up 4.6 percent from a year earlier.
- The ranks of Suffolk and Middlesex County renters earning more than $150,000 a year have more than doubled since 2016, suggesting that buying a home is out of reach even for people with solid six-figure incomes.
On net migration trends:
- The state lost 57,300 residents from April 2020 to July 2022 (the heart of the pandemic).
- Losses of that magnitude have occurred before: following the recessions of 1989, 1991, and the early 2000s, which hit the state harder than many other parts of the country.
On jobs and the workforce:
- The state’s labor force has declined by about 100,000 workers since June 2019.
- In 2022, Massachusetts ranked fifth in the US in computer/mathematical employment per 1,000 jobs, at 43.4.
- The state lost 2,200 jobs in computer systems design and related services from March 2020 to March 2023. Texas added 77,000 jobs, and Florida gained 31,000.
- Massachusetts ranked 33rd in job growth in computer systems design and related services employment from the third quarter of 2019 to the third quarter of 2022.
- The number of the state’s residents age 65 and over is projected to increase by 280,000 in 2030.
The key takeaway is that, yes, Massachusetts has high taxes, but there are bigger forces at play.
”We are working in the face of larger demographic trends,” said Doug Howgate, president of the Mass. Taxpayers Foundation. “We don’t want to put our foot on the accelerator” by putting policies into place that make the state even more expensive.
That means focusing on policies that are “central to Massachusetts’ success,” he said.
And we all know this list: increasing the workforce, improving transportation, building more housing, and helping families access child care, he said.
And, yes, reducing taxes, too.