In most of the conversations I have with local business leaders these days, a recurring question comes up: Is Massachusetts losing its economic clout?
We have long rightly taken pride and comfort in the state’s status as a world leader in higher education, medicine and biotechnology. Our technology and finance industries outweigh their weight. And the Massachusetts workforce is among the best educated and skilled in the country.
But complacency is a real risk. It can be assumed that the successes of the last 40 years will continue in the years to come. But as they warn in the investing world, past performance is no guarantee of future results.
The severe headwinds the state is facing is the focus of a new report from the Massachusetts Taxpayers Foundation, which paints a worrying picture.
Voter approval of the “millionaires’ tax” in November brought the issue of the state’s economic competitiveness back to the fore.
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Like almost everything else, opposing viewpoints also crumble largely along political lines.
Fiscal conservatives argue that adding 4 percentage points to incomes over $1 million will accelerate the loss of people, jobs and wealth to other states.
Progressives counter that the losses will be minimal and will be more than offset by the additional millionaire tax revenue, which is to be used for much-needed investment in education and transport.
Both sides can draw on numerous studies and data to support their positions. Last week, the conservative Pioneer Institute released an analysis of IRS data for 2021 that focused on the sharp rise in net exodus of taxpayers from the state.
The Massachusetts Budget & Policy Center has estimated that fewer than seven in every thousand households would be affected by the millionaire tax.
Of course, the Massachusetts Taxpayers Foundation has its own (largely pro-business) agenda. It was warned that the millionaire tax would hurt the state’s business climate. And it said the state would benefit from tax breaks on short-term capital gains and estate taxes, as well as measures to help seniors, renters and low-income households.
But I like his latest report — a package of charts — because it sheds light on the full range of challenges facing the state. Here are some of the data points that I found noteworthy.
Regarding the housing costs:
- Massachusetts had the lowest home vacancy rate in the country at 2.8 percent in 2022.
- Boston had the second-highest (after New York) median asking rents in March at $3,839 per month, up 4.6 percent year-on-year.
- The number of Suffolk and Middlesex County renters making more than $150,000 a year has more than doubled since 2016, suggesting that home buying is out of reach even for those with a solid six-figure income.
On the net migration trends:
- The state lost 57,300 residents from April 2020 to July 2022 (the core of the pandemic).
- Losses of this magnitude have happened before: after the recessions of 1989, 1991 and early 2000s, which hit the state harder than many other parts of the country.
Regarding jobs and workforce:
- The state’s labor force has declined by about 100,000 workers since June 2019.
- In 2022, Massachusetts ranked fifth in the US for computer/math employment per 1,000 jobs with 43.4.
- The state lost 2,200 computer systems design and related services jobs from March 2020 to March 2023. Texas added 77,000 jobs and Florida gained 31,000.
- Massachusetts ranked 33rd for job growth in computer systems design and related services from Q3 2019 to Q3 2022.
- The state’s population aged 65 and older is projected to increase by 280,000 by 2030.
The key takeaway is that while Massachusetts has high taxes, there are bigger forces at play.
“We’re operating in the face of broader demographic trends,” said Doug Howgate, President of Mass. Taxpayers Foundation. “We don’t want to step on the gas pedal” and take measures that make the state even more expensive.
That means focusing on actions that are “central to Massachusetts’ success,” he said.
And we’ve all seen that list: increasing the workforce, improving transportation, building more housing, and helping families access childcare, he said.
And yes, cut taxes too.
Larry Edelman can be reached at [email protected]. Follow him on Twitter @GlobeNewsEd.
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