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Massachusetts Liberal

Observations on politics, the media and life in Massachusetts and beyond from the left side of the road.

Tuesday, October 13, 2009

Sweet and sour

As the bottom continues to fall out of Massachusetts tax collections and yet another round of painful cuts looms, the Legislature has the opportunity to actually do something during its less-than-full autumn session: close a costly corporate tax loophole.

A corporate tax deduction, created last year as a sweetener for businesses in a tax-tightening measure, will cost the state at least $535 million over seven years, according to a new estimate by the Massachusetts Department of Revenue.

That projected loss of state revenue - and estimates that more than half of the $535 million would benefit just three corporations - comes at a time when state dollars are already stretched thin, prompting calls to rethink the wisdom of the deduction.

Is anyone really surprised that someone will be making out well during a steep downturn thanks to the efforts of lobbyists arguing their case to lawmakers in what in essence was outside of public scrutiny?

Yes, apologists will argue that this really isn't a tax cut so much as it is a reduction in a tax increase. But frankly the stench of a special interest deal that benefits three companies far outweighs that argument.

It would be as if lawmakers carved out a special exemption in the new sales tax to benefit buyers of high end motorcycles. And you didn't see that special interest happen, did you?

The problem is the Taxachusetts myth. Despite data that shows Massachusetts 23rd among the states, slightly below the national average in tax burden (an 32nd in business taxes) the special interests continue to insist we are overburdened.

The mindset is now spawning bumper stickers declaring "Tax it all, Deval" a cute play on words that obviously will be the centerpiece of the 2010 campaign. But obviously, as this latest revelation suggests, not only is not all of it being taxed, it's being done rather selectively and you and I are not among the select.

So my suggestion to bored lawmakers sitting around with nothing to do while the bottom continues to fall out of our revenue base is take a little time away from the lobbyist-jammed fundraisers, get out to the local events that haven't been canceled for lack of municipal funds and then decide if three corporations deserve a tax break that will also create deeper cuts in the services the rest of us want or need.

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Blogger dan bosley said...

ML, this is incredibly complicated tax policy. When you change one part, others change. In this case, by changing our combined reporting requirements last year, we were asking business to increase their tax burden. However, that also increases their future tax liabilities as well as their legitimate tax deferments. This so called loop hole stated that businesses , who had one chance to state their deferment, wouldn't have to keep that amount of revenue in reserve while paying higher taxes. in other words, they took a double hit on this new policy. Since they have one chance to declare this, the amounts are probably much higher than the reality of the situation.
Part of the problem is that DOR has taken one piece of the new tax policy, which taxes business more, and pulled it out to say we are losing money. This is just another action in their goal of setting policy rather than enforcing existing policy. It is unfair. The business community will have to lead us out of this recession by creating jobs. How can they do that when they avoid Massachusetts because we do not have clear transparent tax policy? Again, this is incredibly complex and deserves more thought than this story today.

October 13, 2009 6:54 AM  
Blogger dan bosley said...

Oh yes, and the bottom line which was buried in the story was that Massachusetts would indeed receive more taxes based on last years tax changes. In other words, the business community would be paying more.

October 13, 2009 6:57 AM  

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