The Massachusetts-based Pioneer Institute recently wrote a piece objecting to an ITEP analysis of a proposed Massachusetts ballot initiative. Its criticisms range from inaccurate to irrelevant.
The main critiques raised by the Institute come down to two objections:
1. Pioneer feels ITEP should reject the state’s cost estimate and use theirs instead.
ITEP’s cost estimate is a result of our microsimulation tax model, tuned to official measures of the economy and Massachusetts’ finances. This headline cost was derived from the state’s data and aligns with the state’s own more conservative forecast. It does conflict with the cost estimated by the Pioneer Institute, which believes the measure will be dramatically more affordable than state officials do.
The lower cost they prefer is a result of assuming enormous economic growth from tax cuts. Conveniently, they base this on the growth in revenue in the aftermath of the 2001 recession and tax cut. But the limited sample size is not compelling. ITEP instead uses more standard methods and applies the Congressional Budget Office forecasts to Massachusetts economy and population.
2. ITEP’s analysis is focused on the impact on capital gains, instead of something else.
The Pioneer Institute feels that ITEP should have written on different subjects. Nonetheless, the analysis they criticize is about capital gains, which it clearly situates as part of the full ballot initiative. Other researchers might want to write about the needs of S-corporations: The Pioneer Institute is welcome to do so.
ITEP has engaged in research on tax issues for over four decades, with focus on the revenue impact and distributional consequences of current law and proposed changes. Much of ITEP’s research, including this analysis, is based on ITEP’s proprietary microsimulation tax model, which mirrors models at the federal level maintained by the congressional Joint Committee on Taxation, the U.S. Treasury Department, and the Congressional Budget Office, and at the state level by the Minnesota Department of Revenue and other state agencies.
The capital gains tax cut is tailored to benefit the highest earners
Voters, lawmakers, researchers, and advocates frequently disagree about ideal tax policy. But the facts here speak for themselves. The proposed ballot measure in Massachusetts would cost the state about $5 billion per year in lost revenue. And those tax cuts would be highly skewed towards households with the highest incomes. Of the entire proposal, over two-thirds of the benefit goes to the highest-income fifth of Massachusetts taxpayers. That same group would get almost 90 percent of the capital gains portion.
