A NEW REPUBLICAN trifecta in Washington plans devastating cuts to health care programs, all to pay for massive tax breaks for the rich. State budget officials worry about how Massachusetts will respond when a drop in federal aid drives a hole in our state budget. Advocates call on their elected officials to stand up to DC and deliver a budget that protects working families.
It all sounds familiar, but we’re not talking about today. Twenty-three years ago, Massachusetts faced a major budget crisis as a result of President George W. Bush’s budget cuts. But thanks to the advocacy of a broad coalition of community organizations, faith-based groups, and labor unions, and with strong leadership by the state’s elected officials, Massachusetts weathered that storm and made bold new investments in our economy and people.
Most of the personalities are different today, but the crisis confronting Massachusetts is the same. Last week, Gov. Healey told GBH’s “Boston Public Radio” that “we do not have enough money to even begin to make up for the shortfall” if the Trump administration cuts a significant portion of the federal funding streams that comprise about $16 billion of the state’s $58 billion budget.
The scale of potential federal budget cuts is certainly enormous. But Massachusetts is one of the wealthiest states in the nation; we can afford to minimize the pain caused by the federal government’s actions. To begin addressing the state’s imminent fiscal challenges, we can look at how Massachusetts addressed the early 2000s budget crisis.
The year was 2002. The Massachusetts economy was faltering in the aftermath of the dot-com bubble and 9/11. At the time, Massachusetts was ill-prepared for an economic crisis. With only a minimal rainy day fund in place, the state faced a budget gap of more than $1 billion. Critical public services from health care to public education were under threat.
Progressive advocates met that crisis with a clear demand: Over $1 billion in new revenue that must include taxing capital gains the same as wages. We won both parts of that demand, as the Legislature passed a $1.5 billion package of new tax revenue. The package included half a billion dollars in highly progressive revenue from closing the capital gains loophole, ensuring that wealthy investors would no longer pay a lower tax rate than wage earners.
Our victory helped prevent devastating cuts that year, but it also helped strengthen the state’s finances going forward. In subsequent years, the new capital gains tax rate brought in $1 billion or more annually, so legislators began to direct a large portion of capital gains revenue into the state’s rainy day fund.
Today, the fund sits at nearly $9 billion. It’s one of the nation’s largest budget reserves. And it’s largely thanks to the work that was done to solve the 2002 budget crisis.
That brings us to today. Donald Trump, Elon Musk, and congressional Republicans are preparing to slash federal spending on health care, education, infrastructure, and other public services in order to give billionaires yet another round of federal tax breaks. Massachusetts faces the real threat of hospital closures, teacher layoffs, and vulnerable seniors losing access to long-term care.
In the face of these threats, the Raise Up Massachusetts coalition of community organizations, faith-based groups, and labor unions — the spiritual successor to the coalition that won new revenue in 2002 — has another clear demand: over $1.5 billion in new revenue or reserves that must include taxing billionaire global corporations.
Massachusetts is one of the richest per-capita places in the world. We have the wealth to weather this storm, and maintain the state’s fiscal strength, by tapping a portion of the state’s rainy day fund and raising significant new revenue from the world’s largest, most profitable corporations.
The law establishing the state’s rainy day fund explicitly lists “the state and local loss of federal funds” as one of the scenarios in which legislators can pull from reserves. Our work to build up a healthy rainy day fund was meant to prepare for a day exactly like this — when circumstances outside our state’s control are threatening to harm Massachusetts families.
We also have the tools to raise new revenue by taxing the biggest winners in Trump’s rigged economy: billionaire global corporations like Apple, Amazon, McDonald’s, and Walmart, who conceal their profits in offshore tax havens to avoid paying their fair share in Massachusetts taxes. Raise Up Massachusetts’s Corporate Fair Share legislation, filed as H.3110 by state Rep. Carlos González and S.2033 by state Sens. Jason Lewis and Liz Miranda, would raise hundreds of millions of dollars annually by combating offshore tax dodging.
Both Massachusetts and the federal government use a formula known as global intangible low-taxed income, or GILTI, to tax the excess profits that large global corporations stash in offshore tax havens. But Massachusetts currently only includes 5 percent of GILTI when calculating these corporations’ state taxes, while the federal government and most New England and Mid-Atlantic states, including New Hampshire, Rhode Island, Vermont, and Maine, include 50 percent of GILTI in their calculations.
The Corporate Fair Share legislation would simply increase the share of GILTI that is taxed by Massachusetts from 5 percent to 50 percent, bringing us in line with the federal government and other states.
Increasing taxes on these large multinational corporations would also help level the playing field for local businesses, which can’t hide their profits offshore. This legislation has gained the support of more than 60 state legislators since being filed this January, and could be incorporated into the state’s FY26 budget to start generating new revenue as soon as this summer.
This approach to the state’s budget crisis — raising revenue owed from multinational corporations and judiciously tapping the rainy day fund — is fiscally responsible, it’s politically popular, and it’s proven to be effective by history.
Harris Gruman is executive director of the SEIU Massachusetts State Council and a co-founder of the Raise Up Massachusetts coalition. He was co-chair of the Coalition to Stop the Cuts in 2002. Patricia Jehlen is a Democratic state senator from Somerville and vice chair of the Joint Committee on Revenue.
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