After years of treading water in the state budget, Gov. Deval Patrick has put forth an ambitious $34.8 billion proposal for the coming fiscal year that would make significant investments in education and transportation by raising $1.9 billion in revenue, through a combination of tax hikes and eliminating some tax breaks.
The question: Is the state's economy ready for this?
To raise that funding, Patrick's proposal would increase the income tax from 5.25 percent to 6.25 percent, while doubling personal exemptions. It'd also lower the sales tax from 6.25 percent to 4.5 percent. Several tax breaks for both personal income and businesses would be eliminated.
The gas tax would be indexed to inflation, ensuring gradual increases in what people pay at the pump; the sales tax for soda and candy would be hiked; and the cigarette tax would be increased by $1 per pack.
Patrick would also tap an additional $400 million from the state's rainy day fund.
Increased funding would go first to education. Early Education and Care would see a 26.4 percent increase over the current budget; K-12 education funding would get a $226.2 million bump; and there'd be an additional $197 million next year for the state's higher education system, which has faced even more than that in cuts over the past decade.
The other big investment would go towards transportation—an initial $253.6 million increase in fiscal 2014 and additional spending increases over the next two fiscal years of $600 million and $700 million respectively once revenue reforms are fully phased in. Regarding the transportation investment to improve public transportation and roads, the governor said, ""This is what the people of the commonwealth have asked for."
Unrestricted general government aid—usually the biggest piece of local aid funding, outside of Chapter 70 education funding—would also receive its first increase in five years, of $31 million.
Looming over Patrick's bold plan is the lingering effect of the Great Recession. While education and transportation may need an injection of funding, can Massachusetts afford it right now?
The liberal think tank Massachusetts Budget and Policy Center said the governor's proposals make the tax system "less regressive and more fair."
On Patrick's proposed investments, the think tank said "education plays an important role in helping grow state economies" and "there is an increasingly strong connection between improving the skills of the state workforce and creating a high-wage economy."
Regarding transportation, MassBudget said that "a growing body of research makes the case for the economic development benefits of investing in Massachusetts's transportation system."
Meanwhile, Jim Stergios, executive director of conservative think tank Pioneer Institute, told WBUR that because of various exemptions the income tax is actually a slightly progressive tax system and that property taxes are "incredibly regressive," which the governor ran on in 2006.
"If you want to fix something, fix the property tax, which was an original promise," Stergios said. "I think he actually has merit to do something like that."
On Patrick's proposed investments, Stergios said that Patrick's education proposals do not put any "real reforms" on the table associated with the spending increases and "that's not going to get us a different kind of outcome."
Regarding transportatin, Stergios said the Pioneer Institute has supported modest gas tax increases in the past and recognized the "good work" Patrick has done in delivering infrastructure improvements in recent years.
"That said, we would not come even close to what the governor's saying. We're talking about something on the order of $2.5, $2.7 billion over a 10-year period," he said. "We believe there are still further reforms that MBTA needs to have, needs to do before we hand over $3.1 bilion to them. They're not exactly the best run organization in the state ... We want both reform and we will support increasing some revenues."
What do you think? Can the state afford Patrick's proposal right now? Are there further reforms both in education and transportation that can be undertaken, or after years of treading water, is now the time to make a big investment and drive the Bay State forward?
Tell us what you think in the comments.
[Editor's note: In the original post we mischaracterized how the taxes on candy and soft drinks would change.]