Raise taxes? At a time like this? Are you CRAZY?

So in the years before the great recession, my state, Massachusetts, was doing all the things I expect a state to do. Paying to build and maintain roads, educate children and young adults, protect the environment, enforce health and safety regulations, promote tourism, and help support similar work by cities and towns. The state got the money for these various enterprises, of course, by levying taxes: taxes on personal and business income; taxes on gasoline and other purchases; taxes on dividends, interest, and capital gains.

Well this year, everyone in Massachusetts got a huge tax cut. Our incomes went down, so we paid less income tax. Interest rates are down, corporations are cutting dividends, and our stocks and real estate are declining in value, so we pay less income tax. Businesses are losing money, so they're paying less in business income taxes. We're driving less (smaller cars) and buying less (unemployed), so we're paying less in sales taxes.

But none of the things that the state does, the building of roads or the hiring of teachers, got any cheaper this year.

So how is the state going to pay for it, after the impact of that massive tax cut? Unlike the federal government, the Commonwealth of Massachusetts cannot simply print money. We can issue bonds, but our borrowing capacity is very modest.

So the state needs to increase tax rates to recover the money lost to the huge recession tax cut.

Is this a tax increase? Well, even the most aggressive tax proposals on Beacon Hill won't come close to recovering the lost revenue. There are huge payroll cuts and pension reforms in the budget. The overall operating budget will decrease.

So the next time you hear someone complaining about the big Massachusetts tax hike, ask them if they paid more taxes for 2008 than they did in 2007. Ask them if, even in the worst case, if they'll pay more in 2009 than they did in 2007.