(Boston)
Last night, the Massachusetts Senate overwhelmingly voted, 31-6, to pass the Tax
Fairness bill to close three corporate tax loopholes, preventing some large
multi state companies from avoiding over $400 million a year in state taxes. They also rejected attempts by big businesses
to include the House adopted loophole for multi-national companies like Wal-Mart
and Exxon.
The bill closed three loopholes,
two commonly known as Check the Box and Combined Reporting and the third had to
do with internet hotel resellers. The Check the Box reform, already in place in
45 states, simply requires that corporations file as a consistent
corporate form on both Massachusetts
and federal taxes. For example, it prevents companies from declaring themselves
a corporation on their federal returns, but as a partnership in Massachusetts. This reform alone will prevent an estimated
$170 million in corporate tax avoidance.
The other loophole-closing reform, called Combined
Reporting, is another significant step towards preventing some of the extreme
tax avoidance practices going on today, while also serving to eliminate a wide
array of potential future loopholes that tax collectors haven’t yet caught
onto.
Combined Reporting will put an end to the elaborate shell
games that some businesses play with out-of-state subsidiaries, avoiding an estimated
$220 million annually in state taxes. These schemes leave in-state businesses
that pay their full share of taxes at a competitive disadvantage. Twenty-two states have adopted combined reporting
laws, including our neighbors in New Hampshire,
Maine, and Vermont. Combined Reporting will put an end
to 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.
Closing the Internet Hotel and Reseller Loophole will
prevent internet hotel booking companies from paying less tax than in-state
hotels and motels do on the same sales. Some companies have pocketed the
difference between the higher tax amounts they charge consumers based on the
retail room rate and the actual taxes they turn over to the state based on
lower wholesale room rates. The new law will require that these booking
companies pay taxes on the price they charge the consumer saving $19 million a
year.
“When some mostly multi-state businesses fail to pay their
taxes, regular households and companies without high-priced accountants end up
picking up the tab,” said Cummings.
MASSPIRG praised Senate Leadership, President Murray, Ways
and Means Chairman Panagiotakos, and Revenue Committee Chairwoman Creem.
MASSPIRG also praised Senators Jehlen, Marzilli and Pacheco for their efforts
to strengthen the bill.
The
Senate also increased the tobacco tax by $1 and adopted an amendment filed by
Senator Montigny to dedicate the money to health care reform.
Increasing
the tobacco tax is one of the most effective tobacco prevention programs in the
state as increase costs will decreases tobacco use, particularly among young
people. The $1 tax increase will lead
to a 12.6% reduction in youth smoking; increase the number of kids alive today
who will not become smokers by 46, 000; lead 26,000 current adult smokers in
the state to quit and reduce pack sales by 18% among other benefits.
The
bill now goes to a conference committee between the House and Senate to work
out the differences between the two bills.
