NORTH ADAMS — With Massachusetts staring down budget gaps due to the current recession, a House proposal to close corporate tax loopholes is gaining support.
All four Berkshire state representatives have signed onto a June 19 bill from state Rep. Christine Barber, D-Somerville and Medford, that would bring in an estimated $400 million of additional tax dollars from large, multinational corporations with offshore holdings. It's hailed as a way to keep funding government services threatened by the predicted $6 billion of lost revenue due to the current recession.
"During a State of Emergency that is causing unexpected revenue shortfalls, it makes sense to close a loophole that allows highly profitable, international corporations to avoid paying their fair share of taxes to Massachusetts," said state Rep. Paul Mark, D-Peru.
It is "widely understood to be a large problem" that large corporations often shift income overseas to avoid taxation, according to Kurt Wise, senior policy analyst at the Massachusetts Budget and Policy Center.
While the 2017 Tax Cuts and Jobs Act created the Global Intangible Low-Taxed Income (GILTI) provision, which allows federal and state governments to tax a portion of income shifted offshore, the Massachusetts Legislature in 2018 voted to exclude 95 percent of GILTI from taxation, Wise writes.
State Rep. Tricia Farley-Bouvier, D-Pittsfield, said generating revenue is necessary to avoid large spending cuts when services such as education must be protected.
"Absolutely to have revenue is a much better option than cutting teachers," Farley-Bouvier said. "And there are ways that we can raise targeted, progressive revenue that basically is closing loopholes on the wealthy, and we can do it without broad-based taxes on the middle class."
"An important element to this conversation includes sectors or businesses that are doing well in the time of COVID," added state Sen. Adam Hinds, D-Pittsfield, who said it's important to work to find "effective ways to spread the burden of the economic downturn so that we're all better off in the long run."
Tax increases that had broad support before the recession intensified, however, may be reconsidered. While the House approved a gas tax increase that was expected to generate more than half a billion dollars for transportation infrastructure, a House member told the Eagle that the Senate had indicated it would not take up that bill.
Berkshire representatives said neither income tax nor sales tax would be increased.
While Massachusetts raised its sales tax from 5 percent to 6.25 percent in 2009 during the Great Recession, state Rep. William "Smitty" Pignatelli, D-Lenox, said high unemployment makes such a measure impractical now.
While the state's unemployment rate in May was 16.3 percent, it was 8.2 percent in May 2009, according to estimates from the Massachusetts Department of Unemployment Assistance.
Hinds, who chairs the Senate's revenue working group, said the group will further explore ways to "modernize" the state's tax system in the fall.
"We have a lot of new ideas about how to create a fair tax system, and this [recession] has emphasized the need to do that," he said. "We'll really accelerate our work in the fall. I think that the open question is what is going to be needed for this year's budget, depending on what the federal government does. But the reality is next year's budget is going to be equally concerning."
Danny Jin, a Report for America corps member, is The Eagle's Statehouse news reporter. He can be reached at email@example.com, @djinreports on Twitter and 413-496-6221.