Budget Woes in the Bay State

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Even in the best circumstances, Massachusettsis likely to face a budget deficit of some $3.1 billion in the coming fiscal year, according to a new report issued this week by the Massachusetts Budget and Policy Center (MBPC). The report demonstrates that the expected shortfall is not simply the result of the current recession, but rather, is in part the extension of ongoing structural problems, with permanent revenues failing to meet necessary expenditures. A companion report by the MBPC explains that some of those long-term structural problems can be traced to affirmative changes in tax policy, such as reducing the overall income tax rate from 5.95 percent to 5.3 percent and dropping the tax rate on dividend and interest income from 12 percent to 5.3 percent. Other problems stem from failure to modernize the state's sales tax -- for instance, by broadening its base to include services. With Governor Deval Patrick set to announce his plans to cut spending in the current fiscal year by $1.1 billion, even before tackling the looming fiscal 2010 shortfall, the time has clearly come to reconsider the tax cuts that are at the root of Massachusetts fiscal woes.

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