Describing the state’s competitiveness as damaged by tax increases over the past decade, the leaders of the Greater Boston Chamber of Commerce say they have a prescription that would create 35,000 to 40,000 jobs, generate $100 million in new income tax revenue and increase the Bay State’s appeal to businesses.
The four-point plan they’re dubbing “Renew Mass” is mainly a package of tax cuts and credits aimed at business expansion, and chamber officials say they plan to promote the ideas to candidates for office.
The bulk of the gains, according to chamber officials, would come from permitting multi-state companies to pay taxes only on their Massachusetts sales, rather than their profits or payroll taxes. The so-called single sales factor apportionment, officials say, would create 32,000 to 37,000 jobs when fully implemented, costing the state $20 million in the short-term and $100 million in the fifth year of implementation.
When fully implemented over five years, the plan would sacrifice $165 million a year in business taxes while generating about the same amount in new payroll, property, sales and local taxes, officials say.
Chamber officials say adoption of their plan would signal Massachusetts’s desire to support business at a time when unemployment in the state hovers above 9 percent.
“We honestly believe this is an effective longer-term way to create jobs,” said chamber president Paul Guzzi, flanked by Chairman Jim Klocke and the chamber’s policy team. “The environment that a state has says a lot about whether a company will grow here or stay here. I think this will go a long way toward sending a very important message. Massachusetts wants businesses here and we want businesses to grow here.”
But the business backers will be challenged as they push tax breaks for corporations during an election season white-hot with anger toward government, near-record unemployment and a sense in the electorate that the powerful and connected receive favored treatment.
The chamber officials say that despite the climate, they believe they can sell the measure as a job creator and are working with legislative leaders and gubernatorial candidates to win support for their ideas. Legislation on the issues is forthcoming, Klocke added, noting that the chamber is aiming for action in the next legislative session but would support legislative efforts to advance any components of the plan now.
The chamber unveiled its plan following reports that influential Massachusetts business executives had banded together to push for favorable policies on Beacon Hill, and as political leaders, their constituents stung by job losses, have clamored to carry the mantle of job creation into the November election.
Gov. Deval Patrick and Senate President Therese Murray have proposed legislation they’ve described as “jobs bills,” and House Speaker Robert DeLeo is preparing to roll out an expanded gambling proposal that supporters hope will generate hundreds of millions of dollars in revenue and create thousands of jobs.
The chamber’s proposals also face competition from a pair of initiative petitions hurtling toward the November ballot that would slash the state sales tax by more than half and repeal the sales tax on alcohol, both of which are polling favorably among voters. Together, those plans would drain $2.5 billion from the state’s tax base, according to the Massachusetts Taxpayers Foundation.
“It’s clear [the measures] would exacerbate the short-term situation,” Guzzi said, careful to note that the chamber has no official position on the ballot questions. “It isn’t or shouldn’t simply be about reducing taxes or cutting services as a way to grow the state’s economy.”
The job creation and revenue benefits wouldn’t fully materialize until the plan is implemented over five years, chamber officials say, in 2016, if the proposals were to pass next year.
To arrive at their job creation estimates, chamber officials said they relied on research by Austan Goolsbee, a University of Chicago professor who serves as an economic adviser to President Obama. His studies on single sales factor concluded that states that tax businesses on payroll and profits drive businesses away and discourage expansion.
Allowing multi-state companies to choose single sales factor would effectively bypass provisions of a combined reporting tax law reform enacted in 2007, chamber officials said. Klocke said he expects all for-profit industries to benefit, with the exception of manufacturing, defense and mutual funds, which already have a single sales factor option.
The chamber proposal would also expand the state investment tax credit from 3 percent to 5 percent, a move chamber officials say will spur companies to expand, increasing their annual investment in Massachusetts by $146 million and creating 2,800 jobs. The ITC proposal would lower tax collections by $25.5 million a year, according to the officials.
By lowering the state capital gains tax to 3 percent from 7 percent for Massachusetts start-up companies that operate for at least three years, the state would become a friendlier business environment while sacrificing no revenue until the third year of implementation, when it would cost $11 million, according to the plan.
The plan would also grant businesses operating at a loss the opportunity to delay reporting their losses for up to 20 years, up from the current five-year limit. This, chamber officials said, would bring Massachusetts in line with federal policy and that of 25 other states and create a predictable, stable climate for businesses. This would aid cyclical industries and start-ups, including biotech firms, they said, that can operate at a loss for years before becoming profitable.
Asked whether the state would be better off designing a corporate tax policy from scratch, Guzzi said it brought to mind “Waiting for Godot.”
“To have a totally new set of corporate tax policies would be and could be a fine approach,” he said, adding that he doesn’t believe it’s “realistic” in the near term. “We have to build on what we have.”
