They don’t call the Bay State “Taxachusetts” anymore.
Massachusetts, once a rival to New York for the nation’s highest combined state and local taxes, has taken a series of dramatic steps – from Medicaid reform to property-tax limits – aimed at reducing the burden on taxpayers.
And it’s worked, fiscal-policy experts in both states say.
“Throughout the 1970s, the Bay State perennially rivaled New York in rankings of combined state and local tax burdens relative to income,” E.J. McMahon, director of the Manhattan Institute, told New York lawmakers last month.
New York’s per-capita tax burden of $5,770 is the highest in the nation, a study by the Business Council of New York State found. Massachusetts, with a combined $4,494 per-capita state and local taxes, ranked fifth.
But McMahon said that when taxes are compared to average income for each state, Massachusetts plummets to 28th out of the 50 states, while New York remains in the top slot.
One measure taken by Massachusetts voters was passage of a proposition in 1980 to limit local property increases to no more than 2.5 percent a year. Increases beyond 2.5 percent would require approval by voters in each town or school district.
“Opponents predicted it would starve local governments, especially schools. But there is no evidence of this,” said McMahon.
“That has put some discipline on the local level,” said Brian Gilmore, a spokesman for the Associated Industries of Massachusetts, a business group that has advocated for lower taxes in order to boost the state’s economy.
Gilmore said there have been several other tax initiatives during the early 1990s, when Massachusetts’ economy was in recession.
“Medicaid was one of our budget-busters,” Gilmore said. “There were no policies put in place to address that, and they’ve moderated costs to some degree. Increased use of managed care also addressed some of the costs.”
A study by the Business Council of New York’s Public Policy Institute found that after adjusting for population, New York’s $45 billion Medicaid program costs two-thirds more than Massachusetts’ program.
Gilmore said Massachusetts has benefited, but he added that the state’s continuing loss of population shows that much more needs to be done.
“We’re making some progress,” said Gilmore. “But you have to have a crisis to get the body moving.”
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