August 2, 2004

State Fiscal Conditions & Our Future

Massachusetts Budget and Policy Center15 Court Square, Suite 700, Boston, MA 20108

617.426.1228www.massbudget.org

August 2, 2004

MA Taxes Lower Than U.S. Average

5.000%

7.575%

10.150%

12.725%

15.300%N

Y AK ME LA DC HI

VT NM NJ RI WI

WV CA NE

OH IN ND

MN CT UT AR KS U.S. KY DE PA IL NC

MD MS

WA IA ID MT MI

GA MA AZ OR

NV FL VA OK SC MO CO TX AL TN SD NH

% of

Per

sona

l Inc

ome

Total State and Local Taxes, FY 2006

August 2, 2004

FY 2009: Initial Budget Gap

August 2, 2004

FY 2009: Initial Budget Gap

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

August 2, 2004

FY 2009: Initial Budget Gap

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

August 2, 2004

FY 2009: Initial Budget Gap

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

August 2, 2004

FY 2009: Initial Budget Gap

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

August 2, 2004

FY 2009: Initial Budget Gap

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

August 2, 2004

FY 2009: Initial Budget Gap

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

Spending Revenue0

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

August 2, 2004

The Governor’s 9C Cuts

0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

Spending Revenue

952,000,000

August 2, 2004

The Governor’s 9C Cuts

0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

Spending Revenue

952,000,000

Spending Revenue0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

August 2, 2004

The Governor’s 9C Cuts

Spending Revenue0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

Spending Revenue0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

August 2, 2004

The Governor’s 9C Cuts

Spending Revenue0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

Spending Revenue0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

August 2, 2004

The Governor’s 9C Cuts

Spending Revenue0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

952,000,000

Spending Revenue0

8,500,000,000

17,000,000,000

25,500,000,000

34,000,000,000

August 2, 2004

FY2010 Preliminary Budget Gap

August 2, 2004

FY2010 Preliminary Budget Gap

Spending Revenue$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

August 2, 2004

FY2010 Preliminary Budget Gap

Spending Revenue$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

August 2, 2004

FY2010 Preliminary Budget Gap

Spending Revenue$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

August 2, 2004

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

Spending Has Mostly Stayed Constant

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

2.15%

4.30%

6.45%

8.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

State’s Own Spending Has Declined

0%

1.75000000000000026%

3.50000000000000051%

5.25000000000000077%

7.00000000000000102%

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

6.90%6.80%6.80%6.60%7.00%6.80%

6.40%6.60%6.40%6.70%6.60%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

1.575%

3.150%

4.725%

6.300%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

1.575%

3.150%

4.725%

6.300%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

1.575%

3.150%

4.725%

6.300%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

1.575%

3.150%

4.725%

6.300%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

1.575%

3.150%

4.725%

6.300%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

State Tax Revenues Have Declined

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY080%

1.575%

3.150%

4.725%

6.300%

% To

tal P

erso

nal I

ncom

e

August 2, 2004

Chapter 70 Education Aid

1,500

2,375

3,250

4,125

5,000

FY01 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

15% decrease from FY02

Adjusted Using the Inflation Factor Identified in Chapter 70

August 2, 2004

Chapter 70 Education Aid

1,500

2,375

3,250

4,125

5,000

FY01 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

11% decrease from FY02

Includes ARRA funding Adjusted Using the Inflation Factor Identified in Chapter 70

August 2, 2004

During the Fiscal Crisis We Cut State Education Aid More Than Most States

August 2, 2004

Higher Education

800

950

1,100

1,250

1,400

FY01 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

32% decrease

August 2, 2004

Higher Education

800

950

1,100

1,250

1,400

FY01 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

20.5% decrease

Includes ARRA funding.

August 2, 2004

Local Aid

0

400

800

1,200

1,600

FY01 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

29% decrease

August 2, 2004

Public Health

0

100

200

300

400

500

600

700

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

20% decrease

August 2, 2004

Public Health

0

100

200

300

400

500

600

700

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

19% decrease

Includes ARRA funding.

August 2, 2004

Environment

0

50

100

150

200

250

300

350

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Mill

ions

of $

(FY1

0)

29% decrease

August 2, 2004

Filling the FY2010 Budget Gap

August 2, 2004

Filling the FY2010 Budget Gap

Cuts and Savings1.63

August 2, 2004

Filling the FY2010 Budget Gap

Revenues0.59

Cuts and Savings1.63

August 2, 2004

Filling the FY2010 Budget Gap

Stabilization Fund0.59

Revenues0.59

Cuts and Savings1.63

August 2, 2004

Filling the FY2010 Budget GapFederal Recovery Aid

0.71

Stabilization Fund0.59

Revenues0.59

Cuts and Savings1.63

August 2, 2004

A Tax System Should Be…

August 2, 2004

A Tax System Should Be…

Adequate

August 2, 2004

A Tax System Should Be…

Adequate

Stable

August 2, 2004

A Tax System Should Be…

Adequate

Stable

August 2, 2004

A Tax System Should Be…

Adequate

Stable

Simple/Efficient

August 2, 2004

A Tax System Should Be…

Adequate

Stable

Simple/Efficient

August 2, 2004

A Tax System Should Be…

Adequate

Stable

Simple/Efficient

Fair

August 2, 2004

MA State & Local Taxes are Regressive

0%

3.75%

7.50%

11.25%

15.00%

Less than $18,000 Lowest 20% $58,000 - $97,000 Fourth 20% $526,000 or more Top 1%

% of

Per

sona

l Inc

ome

TOTAL TAXESEffect of Federal Deduction

Top 20%Source: ITEP, 2006 data

August 2, 2004

Sales Taxes are Typically Regressive

$9,000

$41,750

$74,500

$107,250

$140,000

Lowest 20% Third 20% Highest 20%

Average annual incomeAverage annual expenditures

Source: Bureau of Labor Statistics, 2004 data

August 2, 2004

Who Pays the Sales Tax in MA?

0.4%

1.3%

2.2%

3.1%

4.0%

Less than $18,000 Lowest 20% $58,000 - $97,000 Fourth 20% $203,000 - $526,000 Next 4%

% of

Per

sona

l Inc

ome

Source: ITEP, 2006 dataTop 20%

August 2, 2004

MA Income Tax is Progressive

0.200%

1.275%

2.350%

3.425%

4.500%

Less than $18,000 Lowest 20% $58,000 - $97,000 Fourth 20% $526,000 or more Top 1%

% of

Per

sona

l Inc

ome

Source: ITEP, 2006 dataTop 20%

August 2, 2004

Who benefits from an Income Tax Cut?

$10.0

$3,007.5

$6,005.0

$9,002.5

$12,000.0

Less than $19,800 Lowest 20% $63,800 - $105,200 Fourth 20% $218,000 - $562,500 Next 4%

$10,226

$1,776$751

$0$377$214$76

Aver

age

Tax

Cut

Tax Rate Cut From 5.95% to 5.3%

Source: ITEP, April 2008 Top 20%

August 2, 2004

Who benefits from a Dividends & Interest Tax Cut?

$0

$3,000

$6,000

$9,000

$12,000

Less than $19,800 Lowest 20% $63,800 - $105,200 Fourth 20% $218,000 - $562,500 Next 4%

$10,057

$959$242$109$55$27$2

Aver

age

Tax

Cut

Tax Rate Cut from 12.0% to 5.3%

Source: ITEP, April 2008 Top 20%