Creative Ways for Massachusetts to Provide Economic Aid

With the economy in turmoil and unemployment spiking, businesses and families across Massachusetts need emergency aid. Unfortunately, the state can’t easily provide that support because it faces its own crisis: a budget shortfall likely to be measured in billions of dollars.

There’s no simple way to square this circle. Unlike the federal government, Massachusetts has to balance its budget every year, which means any substantial aid package would require new taxes, offsetting program cuts, or a withdrawal from the state’s rainy day fund.

To meet these competing demands — assisting struggling residents and businesses while also addressing widening budget deficits — Massachusetts lawmakers need to think creatively about how to channel support to those who need it most. This policy brief draws on discussions with economists and state budget experts to help identify some potential approaches. The findings are provisional — sketches of potential paths rather than fully fleshed-out proposals — but hopefully they can help lawmakers map the broader universe of possibilities.

Among the options:

• Ease regulations for small businesses by creating a deregulatory commission focused on hard-hit sectors like retail and restaurants.
• Set up a Covid recovery fund, leveraging future tax dollars to provide timely assistance to those in need.
• Offer immediate rent relief, with loans to renters and long-term tax breaks for landlords.
• Give cities and towns more latitude to borrow, thus limiting cuts to local services.
• Apply a one-time surtax on excess profits, so that thriving businesses can help ensure a broad-based recovery.
• Temporarily increase the income tax, while also providing rebates to maximize the benefit to lower-income families.
• Deliberately embrace “pseudo-deficits,” borrowing across fiscal years to avoid austerity.