MWDN: Local lawmakers call for accountability for business tax break programs

April 8, 2011
By Jaclyn Reiss

BOSTON — Local lawmakers are backing a bill that would require better reporting and accountability from companies receiving job-creating tax breaks from the state.

The bill, the subject of a State House hearing yesterday, follows the news that Evergreen Solar and Fidelity Investments, which each received state tax incentives to create jobs in Massachusetts, are moving 1,900 jobs out of state.

If passed, the proposal would require state agencies that grant businesses tax relief to submit an annual report to the Department of Revenue showing if the business complied with job-creation requirements. These reports would be filed in a publicly searchable format online.

The bill would put in place a ceiling on how much a corporation pays workers with state money. At the same time, it seeks to keep the pay from being too low by requiring a large corporation to pay at least 85 percent of the average wage for that job; small businesses must pay at least 75 percent.

If a company fails to create jobs as promised in two years, the state could recover a pro-rated amount. If a company does not meet 90 percent of its promised job creation in three consecutive years, the state would recoup the entire subsidy.

Fifty-one legislators back the bill, including Sen. Jamie Eldridge, D-Acton, Rep. Carolyn Dykema, D-Holliston, and Rep. David Linsky, D-Natick.

State Auditor Suzanne Bump supports the bill.

“Our tax code lacks basic accountability and transparency,” Bump said. “Once a tax break gets passed, it goes into a black box and seldom, if ever, does anyone look back and determine whether it is working as intended or whether there is a continued public benefit.”

Bump investigated 91 out of 203 businesses receiving tax breaks. She found only eight of the 91 have sunset clauses establishing a date on which jobs will be reviewed to see if they meet the spirit of the program, 10 have recovery provisions and 19 require public disclosure.

“Taxpayers shouldn’t stand for this,” Bump said.

Eldridge, the bill’s sponsor in the Senate, said requiring a stronger recovery provision for all businesses would benefit the state more than setting standards on a company-by-company basis.

“Massachusetts spends hundreds of millions of dollars each year on economic development subsidies – and yet legislators, the administration and the general public often don’t know where that money is going, how many jobs are actually being created, and whether the commonwealth is getting a good return on its investment,” Eldridge said. “If a company promises to create a certain number of jobs in exchange for a subsidy and they fail, we should get our money back. It’s that simple.”

State Sen. Karen Spilka, D-Ashland, a member of the revenue committee, supports the bill, but warned that lawmakers need to be up front about expectations from businesses.

“We need to take a long, hard look at our tax-incentives policy and include some clear provisions for clawbacks, but they have to be explicitly clear and fair to letting companies know we’re going to do this,” Spilka said.

One MetroWest company that received such a tax break wound up returning money to the state after it reduced its workforce.

Genzyme Corp. spokeswoman Erin Emlock said the company voluntarily returned $6 million it received in 2009 to create jobs.

“We did create about 300 jobs in 2010, which was more than the 200 that would have been required, but we also sold off some businesses that reduced our headcount, so that offset those job creations,” she said.

Emlock said the company did not wish to comment on the new legislation.

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