State of the Commonwealth: Massachusetts

Governor Charlie Baker had a good week following the news that General Electric is moving its corporate headquarters to Boston. If Baker and Massachusetts continue to implement spending and tax reductions, the measurable success sure to follow will provide a model for the rest of New England.

Given that, Baker continued his high-wire act during Thursday’s State of the Commonwealth address.

One of the commonwealth’s biggest challenges relates to the cost of operating its public transportation system, the “T.” During his address, Baker proposed that Massachusetts double the capital investment in the system’s core infrastructure to $1 billion every year.  Baker acknowledged that this would be a large investment:

And to the taxpayers who may never ride the T but who write a $1 billion check to the system every year, I say you deserve to know that your support is delivering a reliable, affordable, transparent and efficient service.

The American Legislative Exchange Council recently adopted model policy designed to help states operate and manage the costs of public transportation.

Using an anecdote about reforms at the Registry of Motor Vehicles as an example, Baker said, “We’ve closed more than $1 billion in budget deficits without raising taxes or fees. Instead we tightened our belts, got creative and reduced spending.”

According to Baker, his 2017 budget will adjust the commonwealth’s film tax credit. The governor said savings produced from restructuring the credit will help create “an improved tax climate for Massachusetts businesses that sell products and services in other states.”

In the eighth edition of the Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, Massachusetts’ economic outlook ranks 28th in the nation. While still in the bottom half of all states, the commonwealth does hold a strong advantage over the rest of New England, as well as New York and New Jersey.

Governor Baker would be wise to work toward improving the tax climate for businesses in Massachusetts. The recent decision by General Electric to move its corporate headquarters from Connecticut to Boston is proof that people and businesses often seek out states with lower tax burdens.

Along with Rhode Island, Massachusetts is the only state in the combined Tri-State Area and New England whose public workforce accounts for less than five percent of the overall population. An appropriately-sized government workforce allows for budget prioritization, which can combat the growth of pension liability. If Baker and the Massachusetts legislature work to prioritize outlays and translate spending reductions into lower taxes for individuals and businesses, they have a real chance to open a sizeable competitive advantage over the rest of the Northeast.

General Electric may just be the first step.

This is an entry in the ALEC Center for State Fiscal Reform series, “State of the States 2016,” which will perform analysis of tax and budget issues raised in every state of the state address delivered by America’s governors. Check back frequently over the coming weeks to see the results for your state.