The Governor recently announced the need to cut funding for school transportation, job training, health care, and other investments that protect the health of our people and our economy. One of the reasons for these cuts is the triggering of an automatic tax cut caused by a twelve year old law. This tax cut, which primarily benefits the highest income taxpayers, will cost the Commonwealth $140 million a year. It is part of a series of automatic income tax rate cuts that together will cost the Commonwealth $350 million this year.
The economic security of working families depends on reliable access to opportunities that offer good incomes and that allow workers to share in the benefits of economic growth. Unfortunately, data made available today by the U.S. Census Bureau show that four years into an economic recovery many working families across the nation and in Massachusetts have seen only very modest gains.
Both the minimum wage and income enhancement programs like the Earned Income Tax Credit (EITC) are important tools for reducing poverty and boosting incomes among low-income working families. Because these two tools operate in different ways, however – and therefore, in part, have differing effects on different groups of low-income workers – it is important that each remains strong. EITC increases are most effective as a supplement to and not a substitute for a strong minimum wage.
Tax rates are only one among many factors that businesses weigh when deciding where to locate or expand. In Massachusetts, state and local business taxes are lower than in most other states.
A review of employment data for the restaurant industry shows little connection between a state’s tipped minimum wage level and its rate of job growth. High tipped minimum wage levels do not produce slow job growth in the relevant industry.
Some cities and towns have higher concentrations of the labor force employed in low-wage work than others. Raising the minimum wage would tend to have a greater impact in these areas, particularly since workers who receive wage increases are likely to spend a portion of those increases locally.
The FY 2014 budget included new investments in transportation, education, and elsewhere. Part of the funding came from a “tech tax” that has since been repealed. Looking ahead, there are a variety of other ways to fund future investments in our economy and our communities.
Workers across the Commonwealth—and the U.S—still confront a relatively weak labor market, and low-wage workers have been particularly affected by growing inequality and the declining value of the minimum wage.
According to 2011 data recently released by the census bureau, state and local taxes in Massachusetts amount to 10.4% of our total income, which is slightly below the national average of 10.6%.