Massachusetts Sports Gay Marriage, Universal Healthcare, Plus $460M Budget Surplus

Oh man: Massachusetts has $460M surplus

See, I'm not as crazy as you all might have thought I was. Increase social services, increase taxes, and voila, you have a state that is in the top-third of the country in terms of employment, and a surplus that the governor has asked the legislature to stow away into the state's Rainy Day fund, which would stand at $1 billion.

California, are you listening?

Mass. Governor Deval Patrick. Source: Wikipedia

As of 2008, MA also had the third-highest per capita income of the country ($50,375), and unemployment as of June 2011 stood at just 7.9%.

As far as taxes go (2010 numbers):
- MA ranks 23rd highest (or a little above average) for the overall average tax burden
- Flat-rate personal income tax of 5.3% (exemptions if below a certain income level)
- Sales tax of 6.25%, except groceries, clothing (up to $175), and periodicals
- Corporate tax is 8.8%, and capital gains tax sits at 12%

There is a small source of worry in the article, though. The majority of the surplus was due to higher-than-expected revenues from capital gains taxes. This is not a good sign for Massachusett's economy. Here's why:

1) Capital gains taxes only apply when someone sells an investment
This means that people are pulling money out of the stock market, or selling their houses. This is not generally a good sign, because it means that businesses have less capital to invest in better equipment and better people.

Note: Upon further research, home sales dropped 17% over the year of the budget surplus, and prices remained flat. This does not suggest the revenue is from home sales

2) Capital gains taxes disproportionately affect the rich
Not that this broker-than-dirt liberal has a specific problem with that, but it means that any easing of tax rates here won't do crap for the average working folk unless they have a retirement account, or what remains of a retirement account. This is, however, a nice example of legitimate wealth re-distribution that seems to be doing the job.

3) Capital gains taxes are not steady revenue
As previously mentioned, they only occur when investments are sold. That means this is generally a one-time event. Unless the money from the sale was invested back into the stock market (not likely considering the economic conditions of the country and the latest stock dive), money gained from this revenue source should not be treated as anything more than a happy windfall, and Governor Patrick is right to ask the legislature to bank the money.

4) Capital gains taxes are not indicative of higher incomes
If anything, they indicate lower incomes, as people sell investments to try to pay bills. I'd be happy to see evidence that contradicts this, though.

While I'm sure that Governor Patrick is excited to have a budget surplus, the overall message here is mixed. People pulling money out of the stock market indicates one of two things; either they think the market is too unstable to hold their money, or they need the cash to pay bills. Neither can be considered good news, but at least Massachusetts is putting money away in case things really get tough.