Our Opinion: Modest tax reforms would have benefits
Referring to Massachusetts as Taxachusetts is akin to calling the gracefully aging senior citizens comprising the Rolling Stones as the bad boys of rock-and-roll. Both nicknames were true once but haven't been in a while.
Massachusetts has generally been in the middle of the pack for many years when it comes to the tax burden applied by states upon their taxpayers. However, a report released this week maintains that in one area the state has been so generous it has deprived itself of revenue most every other state receives.
According to the Massachusetts Budget and Policy Center (MassBudget), an independent group that researches and analyzes the state's finances, Massachusetts' business tax levels rank in the bottom fifth of all 50 states. "Massachusetts currently has a favorable business tax environment, despite regular claims to the contrary," writes MassBudget President Marie-Frances Rivera in the report. She adds that two specific business tax provisions "appear outdated, ineffective, and unnecessarily costly to the Commonwealth."
The first provision, called the "single sales factor," is tailored to multi-state corporations in the theory that it would increase manufacturing employment in the state. Instituted in 2000, MassBudget notes that the state lost 40 percent of its manufacturing jobs between 2000 and 2014 and there has been no resurgence since. The tax break has not come close to doing what it was intended to do, and according to MassBudget, will cause the state to lose $400 million in revenue in Fiscal Year 2020. A tax break this ineffective and costly cannot be justified.
The second provision is the state's corporate minimum tax of $456, a number that has not been updated in 30 years. MassBudget found in its survey of tax data that 70 percent of all businesses that filed corporate excise taxes in 2015 paid the minimum amount. Lawmakers should took a look at this one-size-fits-all minimum tax with the goal of making sure highly profitable large corporations pay their fair share without penalizing small corporations struggling to grow or at least maintain their footing. Yes, Massachusetts wants to appeal to businesses but failed tax breaks and artificially low tax assessments on major corporations can lead to debacles like General Electric's move from Connecticut to Boston, which has had only modest benefits for the city and none for the state.
MassBudget's report does not constitute an argument for major tax hikes on business. Businesses in the state have other burdens, most notably high energy costs. But it is an argument for the Legislature to abandon its pursuit of a dubiously constitutional "millionaires" tax that could chase businesses and wealthy individuals away and focus instead on repealing a tax break that hasn't lived up to expectations and increasing a corporate minimum tax that is outrageously low and too often exploited.
And let's do away with the Taxachusetts title. It's clever but it no longer applies.
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