Boston (MA) – State Senator Jamie Eldridge (D-Acton) has filed amendments to the Massachusetts Senate Ways and Means Committee FY20 budget proposal that would raise an estimated $165 million in new revenue for the Commonwealth. He has also co-sponsored proposals that would raise an estimated $430 million in revenue annually.
“At a time when Massachusetts is facing a funding crisis in education, health care, housing, and public transportation, and the Massachusetts state budget continues to face a structural fiscal deficit, the Massachusetts Legislature needs to raise progressive taxes this year,” Eldridge said. “For too many years, the Commonwealth has been giving corporations hundreds of millions in tax breaks, and cut taxes for the rich. Over the past 20 years, Massachusetts has become a wealthier state, yet state funding for everything from public higher education to housing vouchers to state parks to local aid continues to be as much as 30% less since 2000. It’s time to reverse that trend. Every legislator has the power to do that.”
Eldridge’s amendment – number 37 – would close the single sales factor corporate tax loophole for mutual fund corporations and raise an estimated $143 million in revenue annually. This special interest tax break, passed in 1996 for mutual fund corporations, was sold as an economic development incentive that would protect existing jobs and stimulate the creation of new ones.
However, the single sales factor does not require businesses to create a single new job or make even one dollar’s-worth of new investment to reap the benefits of the tax cut. As a result, companies can be laying-off employees and still get tax savings. And in Massachusetts, that’s exactly what happened as mutual fund corporations have been laying off thousands of workers since 1996.
Fidelity Investments, for example, who have benefited for more than 20 years from this generous tax incentive, has cut their Massachusetts workforce by almost half despite making record profits.
“While Fidelity Investments and other mutual funds were shipping jobs to other states, the wealthy investments firm has continued to be the beneficiary of one of the largest tax cut in Massachusetts history,” Eldridge said. “This doesn’t make fiscal sense, economic sense, and is the exact opposite of tax fairness for working families.”
Eldridge also filed an amendment – number 46 – that would close the exemption from sales tax for airplanes and aircraft parts to raise an estimated $21.2 million in revenue annually.
“While we all pay sales tax on sale of cars and car parts, aircraft and aircraft parts are inexcusably exempt from Massachusetts sales tax. This is unfair to working class and middle income families,” Eldridge said. “Low-income Massachusetts residents already pay a disproportionately higher amount of their income in general sales tax. Special tax breaks on luxury items, such as on aircraft, only exacerbates this inequity.”
Eldridge also supports an amendment (53), filed by State Senator Becca Rausch (D-Needham), that would raise the tax rate for corporations to raise an estimated $375 million in additional revenue. The amendment would gradually restore the corporate tax rate to 9.5% over a two-year period.
“I hear from constituents every day about the great need for state-funded improvements in our Commonwealth, “Rausch said. “Folks agree we need to investment in education, transportation, combatting the opioid epidemic, health care access and delivery, broad spectrum infrastructure, and more, but we cannot make those investments without new revenues. Corporations have enjoyed a decade of a tax rate reduction. As failing public transit and incredible commute times sting both workers and businesses alike, it’s time to restore the rate. I look forward to working with colleagues and making progress on revenue this session.”
The Acton progressive also backs an amendment (303), filed by State Senator Jo Comerford (D-Northampton), that would raise an estimated $55 million to fully fund school transportation.
Comerford’s amendment would reform the state’s “corporate minimum tax” to make it more fair and progressive. The corporate minimum tax is a kind of “tax backstop” that ensures that all corporations pay at least some income tax, regardless of the strategies they use to avoid these taxes. In Massachusetts, the minimum corporate excise tax is $456, and has remained unchanged for decades.
The Comerford amendment would leave the $456 amount in place for small firms – those with sales in Massachusetts of under $500,000. But for larger corporations, the tax would increase in increments based on ability to pay. This tiered structure would make this tax more fair and would recognize the ability of these firms to contribute to the shared services they enjoy as a company with customers in Massachusetts.
Supporters of corporate tax breaks say that they incentivize businesses to relocate to Massachusetts or to any other state for that matter. But, former Alcoa CEO and George W. Bush Administration Treasury Secretary Paul O’Neill busted this myth at his confirmation hearing on January 17th, 2001.
“I never made an investment decision based on the tax code. . . . If you are giving money away I will take it,” Alcoa then said. “If you want to give me inducements for something I am going to do anyway, I will take it. But good business people do not do things because of inducements, they do it because they can see that they are going to be able to earn [at least] the cost of capital out of their own intelligence and organization of resources.”