House Speaker Robert A. DeLeo said in a television appearance last month that he wanted to consult economists about whether the state needs to raise taxes. A panel of Massachusetts economists took it upon themselves to come up with an answer, and Thursday they delivered it: Yes.
The editorial board of the economic journal MassBenchmarks, made up of 16 economists from the state’s colleges and universities along with the Federal Reserve Bank of Boston, took the rare step of recommending that legislators consider higher taxes to invest in education and infrastructure.
The board “strongly recommends that the legislature and governor take steps necessary to increase tax revenues available to meet the state’s urgent unmet educational and infrastructure needs,” the board said in its report.
Massachusetts needs to invest in schools and public colleges, along with bridges, mass transit, and water systems, according to the report, which is published by the University of Massachusetts.
“I know it’s become such a hot-button issue, no one wants to increase taxes,” said Robert Nakosteen, an economics professor at UMass Amherst and the executive editor of the journal. “Our political system can’t take a precipitous increase in tax rates, but we need to get started. . . . We’re really hoping to start the discussion.”
It’s unclear, though, how far that discussion will go. DeLeo, a Democrat, has been hesitant to raise taxes. And his spokesman greeted the economists’ report Thursday with a lukewarm statement.
“Speaker DeLeo continues to view raising revenue as a last resort,” said the spokesman, Seth Gitell. “Currently he is in the process, along with staff and the relevant House committees, of compiling information and data from a number of expert sources. Accordingly, it is far too early to determine the Commonwealth’s revenue picture for the upcoming fiscal year.”
Governor Charlie Baker has also opposed tax hikes, and he did not break from that position Thursday. “I don’t believe our problem is that . . . our taxes are too low,” he told reporters at the State House. “I think our problem is we need to continue to work on improving the way we spend money.”
MassBenchmarks takes the pulse of the state’s economy several times a year and usually provides projections on economic growth and the labor market. In its 20-year history, it has rarely delved into political issues, although it has generally discussed the need for greater investment in preschool education and roads in the past.
The last time it made fiscal recommendations was during the financial crisis of 2008, when it backed calls for the federal government to invest in infrastructure as a way to jump-start the economy and nearly two years ago when it urged the state to take action to fix the MBTA after the record snowfall paralyzed the system, Nakosteen said.
But if the state falls behind in producing a skilled labor force and lets its infrastructure crumble, it could make Massachusetts less competitive economically, said Mike Goodman, the executive director of the Public Policy Center at the University of Massachusetts Dartmouth.
For example, Massachusetts’ funding for preschool programs failed to keep up with inflation since 2009, and nearly 9.5 percent, or 487, of the state’s bridges are structurally deficient, the economists pointed out.
At the same time, a 2000 ballot initiative approved by state voters to reduce the income tax rate from 5.9 percent to 5.0 percent has cut billions of dollars from the state’s coffers, the economists said.
“It is clear that reductions in the Commonwealth’s revenue generating capacity has stymied efforts to meet the pressing education and infrastructure needs that present ongoing threats to the state economy,” the report said.
The report was embraced by one Beacon Hill leader: Senate President Stanley C. Rosenberg. He said in a statement that the Massachusetts has “fallen behind in meeting our commitment to education and infrastructure.” And he highlighted the left-leaning Senate’s support for a proposed 2018 ballot measure, known as the millionaires tax, that would raise as much as $2.2 billion in new revenue annually from wealthy taxpayers.