WHAT MAKES Massachusetts “competitive?”  Some people assert that we have to cut taxes on the wealthy and corporations to stop them from leaving for other states.

Public conversation about competitiveness has focused on data on out-migration and where Massachusetts is an “outlier.”

Some people are alarmed that “110,000 people have left Massachusetts.”  But other people have moved in.  The net outflow last year was around 7,700.  In previous years, there would have been more international immigration, so there was net population growth every year until the pandemic, combined with immigration restrictions.

We’re not an outlier on taxes

The largest number of people who leave Massachusetts move to Florida or New Hampshire.  People retire to Florida, mostly because of the weather.  Young families move to New Hampshire so they can afford to buy a home, even with a yard.

But about as many people move to the next four states (New York, California, Rhode Island, and Connecticut) as to Florida and New Hampshire.  Florida and New Hampshire have lower income tax rates, but the next four states to which people move have higher income taxes.

The Tax Foundation ranks all states on taxes.  They give high ratings for low taxes.  Sure enough, Florida and New Hampshire are rated high.  Massachusetts ranks only slightly lower, but the other four states where people are most likely to move are much lower, even at the very bottom.
State Income Tax Rating
Massachusetts 11
Florida 1
New Hampshire 9
New York 50
California 49
Rhode Island 33
Connecticut 47

 

But we are an outlier on housing costs.   We have the third highest housing costs in the country. Housing is ranked by every business group as the greatest barrier to recruiting and retaining staff. The Senate tax bill addresses housing costs with Low Income Housing Credits and the Housing Development Incentive Program.   Both House and Senate budgets do far more, with over a billion dollars a year for housing.

Building enough housing, particularly affordable housing, will cost a lot of money, so we need to have enough revenue to support that.

We’re an outlier on transportation.  The Massachusetts Taxpayers Foundation reports that we’re No. 2 in the country in traffic delays, and No. 3 in the world.  Building and maintaining reliable and affordable transit will cost a lot of money, and we need to make sure we have enough revenue.

We’re an outlier on childcare costs.  The World Population Review reports that we have the highest childcare costs in the country.  Both House and Senate budget proposals would take steps to make childcare more affordable.

Some urge us to reduce the tax on short term capital gain, but 80 percent of the benefits would go to the top 1 percent, widening the income gap.  It would contribute nothing to economic growth.  It would cost $130 million a year that can’t be spent on housing, childcare, transit, childcare, and other things that would help businesses, families, and competitiveness.

Our tax system has to be resilient against surprises like the $3 billion in lost revenue due to the tax cap last fall, the $1 billion drop in April revenue, and the potential $2.5 billion in unemployment insurance mischarges.  It also has to be resilient so we can preserve needed programs in future recessions.

Our tax system has to be adequate to support the things that people need to live in Massachusetts — housing, transportation, childcare, and education are only some.