Marie-Frances Rivera, president of the left-leaning Massachusetts Budget and Policy Center, raising TNC assessments isn’t unreasonable, but also isn’t the only means to generate revenue.
“There are other ways that we can raise revenue that wouldn’t impact low-, moderate- income people as much,” she said.
Separately, the Massachusetts Budget and Policy Center, in what it called a “rough estimate,” wrote this week that the Baker administration expects $303 million per year in increased Chapter 70 aid from fiscal 2020 through fiscal 2027.
MassBudget is a nonprofit think tank that conducts research and analysis on economic and budget policy in Massachusetts, with a particular focus on improving the lives of moderate- and low-income residents. This guest post is part of a MassBudget series looking ahead at some major stories to watch for in the Fiscal Year (FY) 2021 budget debate. StreetsblogMASS will share additional briefs and analysis from MassBudget as new budget proposals are released by the Governor and legislative bodies.
The left-leaning Massachusetts Budget and Policy Center previously estimated that the breaks for mutual-fund companies and manufacturers cost the state $224 million in fiscal 2018 alone. Kurt Wise, a tax policy analyst at the Boston-based think tank, said the shift to single sales has been proven, in state after state, to be a money-loser.
Wise doesn’t buy the argument it will stoke economic development. Taken together, he said, the mutual fund and manufacturing industries have shed tens of thousands of jobs in Massachusetts during the 20-plus years they’ve benefited from the tax break.
In a report published in September, the Massachusetts Budget and Policy Center criticized the state’s limited single-sales factor as a tax break that cost the state close to $400 million in fiscal 2020 without saving manufacturing jobs.
“The single sales factor is an expensive tax break that has performed poorly,” Marie-France Rivera, president of MassBudget, said in a statement. “Every dollar lost to the single sales factor is a dollar that can’t be invested in transportation or education or that must be replaced by other taxes.”
“A lot of the policies on the table, like fees to disincentivize driving, have environmental benefits, but hit low-income and moderate-income people the hardest,” said Phineas Baxandall, an analyst with the left-leaning Massachusetts Budget and Policy Center. “Free fares advance both equity and the environment.”
What’s Working: As neighboring states raise minimum wage, NH companies could face pressure to pay more
In Massachusetts, 420,600 workers will benefit from the minimum wage hike, according to the Massachusetts Budget and Policy Center.
Not everyone is celebrating. “The income tax is one of the few revenue sources that asks high-income people to pay in-line with their larger bank rolls,” said Phineas Baxandall, Senior Analyst at the Massachusetts Budget and Policy Center. “Repeated cuts to the income tax rate are a big reason that Massachusetts’ tax system is upside-down. Those with higher incomes end up paying a smaller share of their income, on average, than moderate- and low-income taxpayers pay.”
“About half of that value [charitable deductions] goes to top 1 percent of income earners. These tax changes end up being regressive,” said Phineas Baxandall, a senior analyst at the liberal leaning Massachusetts Budget and Policy Center. “We just think there’s got to be adequate revenue so low and moderate income people shouldn’t be asked to pay more than their fair share.”
The two think tanks framed action taken by other states differently in their descriptions of Section 163(j) legislation around the country. While MTF said “several other states have already taken action to address this issue,” MassBudget wrote that “decoupling from Section 163(j) is not especially common among the states.” But both organizations agreed that eight states â€” Alabama, Connecticut, Georgia, Indiana, Missouri, South Carolina, Tennessee and Wisconsin â€” have decoupled from Section 163(j).
“If Massachusetts decouples, it will be an outlier,” MassBudget said.
MassBudget and Policy Center President Marie Frances-Rivera and Senior Policy Analyst Kurt Wise on their recent study on corporate taxes in Massachusetts. (~ 24:20 minutes into the segment)
The Massachusetts Budget and Policy Center, a more left-leaning think tank, seemed to prefer the Senate’s approach. The center says Massachusetts businesses received an estimated $4 billion in tax relief from a federal tax cut and don’t need the additional savings that decoupling would provide.
“The Commonwealth should not be seeking additional ways to reduce state-level income taxes on profitable multi-state and multi-national corporations operating in Massachusetts. This approach provides an unwarranted tax advantage to a subset of businesses: those with multi-state and/or multi-national subsidiaries and sophisticated accounting departments,” the organization said in a position paper released Monday. “Providing such corporate tax cuts also deprives the Commonwealth of much-needed revenue for investments in education, transportation and more — all of which allow both businesses and communities throughout the state to thrive.”
Corporate excise taxes in the 1980s accounted for about 16 percent of the state’s total tax haul each year, according to MassBudget. The corporate share of the state’s annual tax take, however, has declined to an average of 10.6 percent over the past decade.
The decline, the center said, corresponds with an increase in corporate profits as a share of U.S. income from 9.1 percent to 13 percent.
“At a time when profits are soaring, taxes on those profits should not be delivering a smaller slice of our total tax pie. Kids, commuters and communities across the state need profitable corporations doing business here in Massachusetts to step up and do more, not less,” said MassBudget President Marie-Frances Rivera.
The report’s author, senior policy analyst Kurt Wise, said there is “no one reason” why the corporate share of tax collections has declined while profits have grown, but the dip did occur after the Legislature in 2008 approved a phased-in reduction in the corporate tax rate from 9.5 percent to 8 percent.
The center also blamed “increasingly aggressive” tax avoidance strategies and corporate tax breaks adopted by the Legislature, sometimes as a way to encourage job creation.
Wise also acknowledged that the state has increased sales and tobacco tax rates and began taxing goods and services that weren’t taxed in the 1980s, including casinos, marijuana, short-term rentals and ride-hailing services like Uber. Those new sources of revenue could, to varying degrees, naturally shrink the business community’s share of the total tax burden.
As one of the highest-income states in the country, people might think Massachusetts leads the nation in bold initiatives like universal childcare, debt-free college, and electrified high-speed rail across the state. Instead, year after year, we defer these dreams. Read our president’s latest on how the Commonwealth can find the revenue we need to sustain economic mobility for all.
The Massachusetts Budget and Policy Center reports the tax hit on Bay State drivers is now about a dime cheaper than the average paid by drivers on state and local taxes in most parts of the country, according to State House News Service. That’s surprising and a benefit likely wiped away by the extra cost of delivering gas from refineries to New England. Still, given this state’s tendencies, it’s sure to be fodder for those who argue for a tax hike. One advocacy group suggests Massachusetts motorists could take on as much as 25 cents per gallon more.