BOSTON—Business
leaders from across the state are calling for closing of tax loopholes
before the “Special Commission” studying Governor Patrick’s proposal to
close tax loopholes at the State House.
Shattering
the myth that closing the tax loopholes would be bad for business, over
60 businesses called for an end to tax-avoidance practices allowed by
our current tax code in Massachusetts.
“My
business depends on educated and well-trained employees at all levels.
My business depends on the state maintaining decent infrastructure so
that we can get our raw materials and deliver finished products
efficiently. My business depends on the community around it being a
place where people want to live,” testified Steve Grossman, President
and CEO of Grossman Marketing Group. “All of this costs money. If we
share these costs fairly, we can all benefit from a government that
provides solutions that we all need—and that allow businesses to
prosper.”
A
panel of local Massachusetts businesses owners presented the committee
with a list of over 60 business leaders and owners who joined in the
call to level the playing field and close corporate tax loopholes.
“Businesses
are good based on what they do—not based on taxes. Businesses are good
because of good leadership, a good product, and a good workforce — not
tax breaks. Those who believe otherwise are naive or have never run a
company. It’s no different from when the first minimum wage was
proposed, people said that would be bad for business and it wasn’t.”
explained Arnold Hiatt, former CEO of Stride Rite. During his 25-year
tenure at Stride Rite, the company grew from a market value of $36
million to $1.5 billion .
“Many
small business owners don’t see how these corporate tax breaks help our
business or our economy,” said Laurence Hammel, Owner of The Longfellow
Clubs. “Asking big business to pay the same taxes we pay is not only
fair, but makes good business sense for the economy.”
Basilio
Encarnacion owner of two restaurants, in Lynn and in Salem said, “I
paid $5,000.00 in taxes last year for my 2 small restaurants. We're the
backbone of the local economy and we're the ones struggling to survive,
while some large mult-istate companies are using loopholes to only pay
the minimum corporate tax of $456 a year. Closing these loopholes will
level the playing field for business like mine."
Michael F.
Wilcox, CFA, President & CEO, of Alford Associates, Inc., a
research and consulting firm specializing in foreign exchange analysis
said, “To build the kind of economy we want, we all need to contribute.
We can’t afford to lose $500 million per year so large multi-state
corporations can avoid paying their fair share of taxes.”
The
commission is reviewing Governor Patrick’s proposal to close 7
loopholes totaling approximately $500 million a year, once fully phased
in.
Some of the specific tax reforms to close the loopholes include:
Combined
Reporting – An updated accounting method that prevents multi-state
companies from shifting profits to out-of-state- subsidiaries as a way
to avoid taxes.
In
the past two months, governors in at least five states and legislative
bills in at least four others, have proposed to join 20 other states
that have decided to bypass tricky tax-avoidance transactions between
subsidiaries by requiring affiliated firms to file taxes together and
pay taxes based on their combined in-state business activity.
Check
the Box – This loophole closing simply requires corporations to choose
and be taxed as the same corporate structure in Massachusetts as they
choose to be classified federally. Massachusetts is one of only five
states that have not yet closed this loophole by requiring businesses
to "check-the-box" and designate a consistent corporate form.
Insurance
Companies Operating Non-Insurance Businesses – Requires businesses
owned by insurance companies to pay the same taxes as other companies.
Insurance companies are taxed on their premiums rather than their
profits. But some insurers operate non-insurance businesses and use
their special exemption to avoid paying taxes on those businesses.
Deeds
Excise Loophole – Closes the loophole that allows companies to avoid
paying the real estate transfer tax by creating a shell subsidiary
which is given temporary ownership of the real estate, and sold rather
than selling the real estate directly.
Internet
Hotel and Reseller Loopholes – Closes the tax loophole that allows
internet retail agents to avoid paying hotel and motel tax on the full
price of the room as charged to the consumer. Although the consumer
pays tax on the higher retail price, the state only receives the amount
on the lower, wholesale price.
“This
is really an issue of fairness”, said Deirdre Cummings, Legislative
Director of MASSPIRG, one of a number of organizations including
Neighbor to Neighbor and Business for Shared Prosperity, working with
businesses and others to close the tax loopholes.”
