HOUSE SPEAKER Salvatore DiMasi is at his best when he stands up for fairness.
When
Beacon Hill took up healthcare reform, DiMasi insisted business must
share the cost of expanding coverage to the uninsured. He did it, he
said, because it wasn't fair to force taxpayers to cover for employers
who refused to cover medical costs for their employees.
Now,
with tax reform on the table, DiMasi is standing up for something else:
unfairness. But DiMasi embraces the argument that business deserves
certainty when it comes to taxation.
"This is the tax structure we've had for years. There's a reliance factor," DiMasi said.
I
asked DiMasi if he believes business is entitled to certainty even if
it involves an unfair tax policy. He restated my question in his own
words: "Should it be changed because it's the fair thing to do?"
Yes, Mr. Speaker, it should.
As
part of his budget proposal, Governor Deval Patrick filed legislation
designed to make it harder for business to avoid taxes. The governor's
goal is fair and desirable. The state could collect several hundred
million more a year in tax revenue from corporations which are
currently finding ways to trim their tax bills. That additional revenue
could go back to cities and towns for property tax relief, or other
municipal needs.
But
DiMasi rejected Patrick's proposal. Instead of making sure business
pays its fair share, DiMasi would rather dip into savings to close a
projected budget gap. In doing so, the speaker stands with the
coalition of the greedy at the Greater Boston Chamber of Commerce and
other business-backed groups.
The
business community argues that closing so-called loopholes amounts to a
tax increase. I suppose it does -- in the same way that making a
millionaire pay for a previously free lunch is an unwelcome strain on
the wallet. But that doesn't make it unfair or too big a burden.
According to the Massachusetts Budget and Policy Center, the legislation proposed by the Patrick administration would:
Stop companies from shifting income between subsidiaries as a way to reduce taxes ($136 million).
Stop
companies from calling themselves partnerships in one state and
corporations in another state, as a way to reduce taxes ($99 million).
Require businesses owned by insurance companies to pay the same taxes as other businesses ($14 million).
Stop
corporate taxpayers from placing real estate in a subsidiary and then
selling that subsidiary rather than the real estate itself as a way to
avoid the real estate transfer tax ($12 million).
Make
it harder for businesses to lease equipment from their own subsidiaries
to avoid paying the full sales tax up front ($28 million).
The
business community is fighting Patrick's proposal with the usual
rhetoric: Closing the loopholes will keep new business away from
Massachusetts and encourage businesses already here to invest elsewhere.
However,
it won't be easy for a company looking to expand to find a state with a
lower tax burden. Several recent studies suggest that overall business
taxes are lower in Massachusetts than in other states. For example, a
study conducted by Ernst & Young for the Council on State Taxation
showed that in fiscal year 2006, businesses in 41 states paid a greater
percentage of state and local taxes than they did in Massachusetts.
The
business community prefers to cite a national study done by the Tax
Foundation's State Business Tax Climate index. In this study, 35 states
have a better "business tax climate" than Massachusetts. But, as the
Budget and Policy Center notes, the study is measuring the manner in
which states tax business, not the tax burden. According to the study's
authors, an unfavorable business climate exists when a state treats
different industries differently for tax purposes. "The more riddled a
tax system is with politically motivated preferences, the less likely
it is that business decisions will be made in response to market
forces," the authors explain.
In
Massachusetts, different industries, such as manufacturing, insurance,
and financial services, successfully lobbied politicians for special
tax breaks; but remember, in the end, tax breaks didn't stop companies
like Fidelity from moving operations out of Massachusetts.
The speaker who stood up to business on health care should also stand up to business on taxes.
It's the fair thing to do.
