BOSTON— Governor Patrick’s move to curb the state’s reliance on the capital gains tax was applauded today by MassINC, the nonpartisan public policy institute that recently warned of the state’s growing reliance on this volatile and unpredictable revenue source.
“I commend Governor Patrick and Secretary Kirwan for seizing the opportunity within the current budget crisis to put forth this critical reform measure,” said Greg Torres, President of MassINC, referring to language Patrick included in his budget proposal that would cap capital gains revenue at a predicted amount and then transfer the money to a safety fund that could be used during times of financial distress.
“In every economic downturn, we realize the consequences of relying so heavily on capital gains tax revenue, yet our dependence on this tax grows every year.”
Torres also urged the Massachusetts Legislature to support the language, saying, “”The governor’s proposal deserves special consideration. It is a commonsense approach to minimizing the tax’s volatility and its impact on the state budget.”
In December 2008, MassINC reported that from 2002 to 2006, capital gains tax revenues accounted for 54 percent of the state’s growth in tax revenues, making it the third most at-risk state in the nation for capital gains tax declines. In Capital Gains: Avoiding Harm to the State Budget,” MassINC author Cameron Huff stated that Massachusetts’ reliance on capital gains is 47% greater than the national average.
The Governor’s recommendations on how to make the state less vulnerable to capital gains tax declines are similar to those put forth by MassINC in its report which included: strictly limiting the budget’s annual reliance on capital gains revenue, and establishing a new capital gains stabilization account to even out the flow of capital gains revenues to the budget.
About MassINC
The Massachusetts Institute for a New Commonwealth (MassINC) is a nonpartisan, evidence based organization. Its mission is to develop a public agenda for Massachusetts that promotes the growth and vitality of the middle class. Its governing philosophy is rooted in the ideals embodied in the American Dream: equality of opportunity, personal responsibility, and a strong commonwealth. MassINC publishes the quarterly journal, CommonWealth.