The GOP Tax Plan Would Hit Massachusetts Hard

There have been so many articles about the ways in which the tax plan coming out of the GOP-controlled Congress is bad for America. To briefly recap:

  1. It raises taxes on the poor and lowers taxes on the rich (here);
  2. It actually raises the federal deficit, which conservatives generally consider the biggest long-term threat to America today (here);
  3. It will do nothing to spur employment growth, but will increase dividends and corporate profits (here);
  4. It raises taxes on the poor and lowers taxes on the rich (here).

I’m sure I left some things out.

Aside from being a Robin Hood in reverse, this tax plan would have probably derailed my education and, thus, my life had it been in effect in 2009. That is for one simple change – tuition benefits for graduate students would no longer be tax exempt. This sounds like not a big deal, but it is.

NPR wrote a story showing exactly what that would mean for an example PhD student. In 2016 this student earned a $30,000 stipend, on which she paid taxes – about $2,500. But under the new tax plan, she would be taxed on both her stipend and the value of her tuition (which is paid for through grants) – about $60,000 total. Her tax bill would then be about $7,500, a $5,000 increase. 

The Massachusetts Angle

This particular change in the tax code is appalling for me on a lot of different levels. Pragmatically, it discourages people to go into the very fields where we need a lot more people – those which require advanced training, such as scientists, engineers, doctors, etc. Philosophically, it punishes low-income graduate students, while people who fly in private jets will get a tax break.

Without going off on a tangent, I do think that issues of free speech and tolerance of a wide range of ideas needs to be addressed on college campuses – specifically liberal tolerance of conservative speakers and events. Richard Reeves published an article through Brookings pointing out that small liberal arts colleges (like my alma mater) are especially bad at allowing conservative speakers to go on stage.

es_20170314reevesfreespeech
In red are colleges that have disinvited conservative speakers since 2014. You can see that it tends to skew toward wealthier institutions. Source: Brookings Institute

 

Even more troubling, a recent Brookings Institute poll showed that 20% of college students think it’s acceptable to use violence to silence objectionable speakers. To re-emphasize, 1 out of 5 college students are OK with cracking some skulls if they don’t like what the people have to say.

I suppose it’s unsurprising then when our president said, “I love the poorly educated,” at a campaign rally. And maybe we shouldn’t be surprised that a conservative congress is trying to stick it to all those (presumably liberal) graduate students seeking advanced degrees. But from the Mayflower to the US Geological Survey to the Space Race, The United States has historically been a place that values and supports the pursuit of knowledge. This tax plan is a distressing departure from that tradition.

A big reason I chose Massachusetts is precisely because it is a state that is defined by the presence of higher education institutions. Thought leaders from around the country and around the world come here to learn, discuss, and dream. That makes this element of the tax plan that much more dangerous to the state.

Boston colleges
Boston-Area Colleges and Universities. Harvard gets four stars because it’s Harvard, I suppose. Source: MassGIS

The Boston area alone has 52 institutions of higher education. The Pioneer Valley has at least 15 (not counting some of the less prestigious institutions – sorry Baystate Medical Center Midwifery Program!). And, of course, some of the most august institutions in the country – with some of the most robust graduate programs – are located in the state, including Harvard, MIT, Amherst, and Williams.

PV Colleges
Pioneer Valley Colleges and Universities. Source: MassGIS

Universities as Anchor Institutions

Unlike the heavy industry which left the Pioneer Valley in the 1950s through 1980s, higher ed has been in the region for hundreds of years and is unlikely to go anywhere. Universities serve as “Anchor Institutions,” engines of economic development that aren’t easily transferable elsewhere (similar to medical institutions).

As this article from CityLab points out, “General Motors in Flint, Michigan, picked up and left. And with it went all of these jobs, and that really decimated the economy. Wayne State University in Detroit? They’re not going to be picking up and leaving.”

It doesn’t take an expert to see the economic impact that these institutions have on the region. Amherst, home to three post-secondary educational institutions, boasts among the highest real estate values in the region. The areas around Smith and Mount Holyoke are home to thriving cultural districts and numerous small businesses. What would Westfield be without Westfield State University?

This tax plan is going to hit the Bay State, and the Pioneer Valley, hard. An assault on learning is an assault on Massachusetts. I know that my life would have been irreversibly harmed if I’d had to pay taxes on the grants I received while earning $12,000 per year pursuing my master’s degree (it would have gobbled up virtually all of my stipend).

Unfortunately there are thousands of others in the same boat today, many of them our neighbors. Let’s keep our fingers crossed that at least that part of the plan, if not the whole thing, doesn’t pass.

 

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Immigration Saved the Pioneer Valley

Hampden County is a region historically shaped by waves of immigration and migration. Springfield, the largest city in the county, has historically been a magnet for immigrants looking for economic opportunity. Holyoke, where I live, was founded as an industrial city right around the same time that waves of Irish immigrants were looking for work. And during The Great Migration, the Valley became a destination for thousands of black migrants fleeing the Jim Crow south and looking for a better life .

So I wasn’t surprised to see that immigration and migration still play a crucial role in the health of the region. I recently came upon an interesting Brookings report looking at the impact of immigration on population growth. What was striking was that for many US cities, without immigrants they would have seen a net loss of people.

migration
Source: Brookings Institute

Dark blue dots represent cities where US citizens are leaving, but new immigrants are at least partially offsetting their departure. Unsurprisingly, in areas where the cost of housing is high (northeast and California), or where job opportunities limited (the Rust Belt), Americans are increasingly deciding to go somewhere else. 

This is certainly true in Springfield:

migration_springfield
Source: Brookings Institute

In the Springfield metropolitan area, if it weren’t for immigration, the population would have declined between 2010 and 2016, presenting a few different challenges:

  1. Economic stagnation – The populations of Springfield and Holyoke have plummeted since the 1950s, leaving many buildings of all kinds (residential, commercial, industrial) abandoned and blighted. Without new residents opening businesses, occupying housing units, and shopping, the urban stagnation and blight of the two cities would have been even worse.
  2. Struggling city services – As the cost of doing business goes up, cities depend on an expanding economic base in order to pay for basic services (the most costly of which is running the public schools). Especially since Prop 2 1/2 tied the hands of cities to raise revenues, an expanding tax base is the best way to keep up with the cost of these services.
  3. Political irrelevance – Large populations bring political clout. The fact that Springfield is the third largest city in Massachusetts matters when the state is looking at new investments. A declining population means declining relevance.

The Immigration Controversy

Given the multiple studies on immigration showing the overall economic benefit immigrants confer (not just well-educated immigrants), it has baffled me that it’s such a contentious issue. But then I read an article in The Atlantic by Peter Beinart about immigration which put things into perspective.

Beinart argued that the tenor of immigration debates has polarized over the past decade (then again, what hasn’t?); today, liberals tend to deny any downsides of immigration, while conservatives reject any of the upsides (more on that here). If the large-scale, long-run impacts of immigration are mostly positive, Beinart contends, then there are many short-term problems associated with immigration.

According to Beinart, the biggest immediate impact is in the low-skill employment market. Immigrants without specialized skills coming into a region are competing, at least to some extent, with low-skilled workers already there. This could be in construction, custodial services, food preparation, farm labor, etc. A large, low-skilled immigrant presence is going to depress wages in these sectors (already low to begin with) for everyone.

The economist and policy wonk might point out that, in the long run, everyone is better off for having those immigrants (they are more likely to start small businesses, they occupy hard-to-fill jobs, etc.). But try telling that to an underpaid roofer; as John Maynard Keynes pointed out, “in the long run we’re all dead.” 

The Pioneer Valley Twist

The next big wave we can expect in the Valley is Puerto Rican climate refugees leaving the island after Hurrican Maria. Holyoke is already half Puerto Rican, and Springfield is a third. This is an interesting twist, because these folks are not immigrants – they are American citizens. But that doesn’t mean that they aren’t reflective of every wave of immigrants in the past: desperately poor, leaving their lives, families, friends far behind them, and hoping for new opportunity.

I have substantial concerns about the capacity of Holyoke and Springfield to support a new group of transplants who will undoubtedly need a lot of services. State and federal authorities will be crucial to ensure that these two cities, already supporting large high-need populations, are able to effectively accommodate the education, healthcare, nutritional, and other needs of our new neighbors.

What I have no doubt about is that, in the long run, the Pioneer Valley will be healthier for welcoming these folks into our communities. There will be bumps along the way, for sure. But the newcomers of today sow the seeds of economic, political, and cultural vibrancy for tomorrow.