From reading the postings on BMG I got the impression that the Patrick plan for closing state tax loopholes made a lot of sense and I emailed my state legislators to tell them so. However, over the past few weeks I’ve seen various politicians interviewed on our local PBS state politics show and have been amazed at how they feel the need to pander to business even on the issue of the tax loopholes.
By the way, WGBY, the public broadcasting station in Springfield, has a show called “The State We’re In.”. Each week the host interviews one or more people in state politics. The show is available online here, Or if that link doesn’t work try this.
Listening to some of these state legislators I am awed at how big business dominates politics in Massachusetts these days, not unlike what’s been happening on a national level. For example, the host asked state senator Stephen Buoniconti what his stand is on closing the tax loopholes for business and the Senator replied that he went to Mass Mutual and asked them how they felt. When they responded that they were opposed, then he was opposed.
I recently got a job at Mass Mutual (now on the Forbes largest 100 corporations by revenue) and they recently announced record profits and record dividends. They have over 4,000 employees in Springfield and I find it unimaginable that they have any desire to leave. So why shouldn’t the legislature require them to pay their fair share of taxes?? Is the problem that they could finance an opposition candidate to Buoniconti and others?
This brings me to a pet issue of mine. It seems to me that an awful lot of what’s wrong in the US right now is the result of corporate interest taking precedence over human interests in our political process. For example overdependence on fossil fuels, global warming (oil companies), unnecessary “preemptive” war (military-industrial complex) no effective fuel economy standards for cars and no willingness to invest in electric cars (auto and oil industries), draining of the aquifers (corporate agriculture), etc, etc. However, the solution may be at hand. The internet holds out the hope that candidates can get elected, and stay in office without selling their souls to business. If only we can get voters to buy the idea that their civic duty involves digging a little deeper to find out what’s going on and then acting on it.
Bravo! Are these legislators really Democrats at all anymore? It’s as if we’ve all be worn down by 27 years of Reaganite procorporate propaganda. Tell them all: close the loopholes now! You and I can’t pay for accountants and lawyers to find loopholes to avoid taxes. And your local business–your corner grocery or hardware store or coffee shop– probably can’t either. But that corporation that bought up our homegrown banks and department stores can. Why didn’t DiMasi support Romney, since he seems to support Romney’s agenda of protecting corporations instead of citizens and small businesses?
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And where are all of the union pension fund monies invested? You know –unions–like the MTA.Corporations have a fiduciary responsibility to watch the
bottom line. I believe it was Woodrow Wilson who said, ” The business of America is business”.
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I suppose that you could make the point that we could give Marxist-Leninism a try. Seemed to work well for them. We can all wallow in mediocrity and universal suffering together.
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businesses are looking outside our borders in increasing numbers. You can off er every banal excuse you wish, the bottom line is that Massachusetts is hostile to business.
It’s one thing after another. I will bet a weeks pay that Fidelity is gone within two years to their new Houston location. Then there will be the usual accusations, finger pointing, cry’s of abandonnment and we have no one to blame but ourselves. It ain’t because they love the weather that there is a tidal wave of migration to New Hampshire.
That the quote was by Calvin Coolidge, former governor of Massachusetts
There’s a big difference between Coolidge and Wilson–and that difference is the reason Coolidge’s quote is remembered. It helps illustrate the era of the 1920s.
Do you own stock? Then you are an owner of a corporation. Corporations aren’t boogey men, they are groupings of people like you and me that own the companies that produce the goods that allow us in America to have the standard of living that we have.
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Corporations are not some faceless, inhuman conglomeration hell bent on destroying the world.
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“Closing Loopholes” amounts to tax increases, which will be passed on to consumers. Take the $78million “telephone pole” loophole. One can say that telephone poles provide for the common good, as they bring telephone service to people. That is what the legislature saw in the 1920s when they enacted the legislation that is still in effect today. What if we close that “loophole?”
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If we close that “loophole” it won’t be Verizon that pays the extra tax it will be passed on to the consumer. With 6 million residents in massachusetts that would be an increase of $13 per capita. Now I fully understand that there are also business customers that have phone numbers as well as residential phone customers. And that the tax burden would prorated between the two. But the greater point is that it will be paid by us the consumer not the “corporation”.
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You may argue that $13 is not much, but $13 here and $5 there and $50 here start to add up. Sal DiMasi is right.
Not necessarily, and it’s certainly not a one-for-one ratio. They only pass it on to consumers if that’s what the market will bear. In the case of the telephone poles you may have a point, since telephone service is pretty inelastic.
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Look, I genuinely do not look at business as a big greedy cash cow to be milked at every opportunity. People need jobs, and business creates those jobs.
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The problem is that the state needs money to provide essential services — essential to the business climate as much as the wider quality of life: infrastructure, education, housing. If you don’t want to raise the income or sales taxes, where’s that money going to come from?
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And if you say “budget cuts”: Patrick’s doing that, too.
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Not anymore. Here’s three choices, depending on where you live: * cell phone only (very popular amongst the under 25 crowd) * Vonage or other IP telephony * Comcast or other coax telephony
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Phone service really does have choices these days, and inertia seems to be the only thing keeping Verizon’s home service in the game.
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(Otherwise, I completely agree with your post)
The “telephone pole” out my window doesn’t only carry telephone service to my home, well actually I only have a cell phone, it also carries cable television and electricity. Those companies pay a rental fee to use that pole. So if the first three options of who would pay are customers, shareholders, and employees. The the fourth is the other companies that use the telephone pole, which also have customers shareholders and employees. So the burden will be spread, but most of it will fall on the consumer.
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Since the customer is the common thread, and each corporation theoretically has different shareholders, and definately has different employees, the customer gets most of the shaft.
Customer, shareholders or employees. I guess I’d bet that the employee gets the shaft.
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Regardless supporters of raising the corporate tax are tacitly saying they favor the government having the money at the expense of the customers or employees of Verizon, and trusting the bureaucrats to spend it more wisely than non-bureaucrats.
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When it comes down to it, that’s probably the difference between Conservatives/Libertarians and Liberals, no?
Aforementioned companies already pay their various and asundry corporate fees and taxes. Additionally, look at you phone bill. The federal government is already using communications companies as tax collectors over and above what they owe.
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Why constantly raise taxes to keep up with the shrinking bottom line? Why not look at government, the great sacred cow, and start eliminating jobs,eliminate legislature pay and perks, cut some vacation time(fifth week after twenty years), sick time, personal days off, cut medical benefits, cut grants to 401(3)C’s, put an end to unfunded mandates. The amount of money frittered away by fraud, waste and abuse likely accounts for over thirty percent of total expenditure. For a business to stay in business, they have to bite the bullet or go under. Government just keeps getting larger and larger. Eventually it will reach critical mass, everyone just hopes and prays it isn’t on their watch.Massachusetts suffers from a little more greed and voter apathy than other states.
Verizon and other telecommunications companies were able to avoid millions in property taxes 2-3 years ago when they incorporated in Bermuda. Did they pass these savings on to their customers?
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Nope.
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So why should I believe that they will pass along increased costs? If they could have raised their prices, they would have by now.
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Why should we subsidize the business model of one group of companies over another, for no reason that benefits our society?
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Why should the non-insurance business of insurance companies be exempt from taxes while the business of their competition is not exempt?
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Why should a telephone company be free from taxes on their poles, while an electric company is not?
I don’t know the answer to this question. But it could be argued that there are more “telephone poles” than “electric poles” in Massachusetts because of the tax difference.
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After all the telephone company and electric company share the poles, along witht the cable company(ies).
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Is there a place to get those statistics?
I think it is 50-50 or close to it. It’s a shared responsibility to carry the utilities. If you look at a pole, there will be an aluminum identifier plate on it about seven feet up.
It’s true that if the $78 million is spot on, the increase would be $12.28 per man, woman, and child. And you rightfully mentioned that it excluded business lines, and didn’t even mention that the 6.35 million people includes people who don’t own a verizon phone in the state — cell phone users, kids in dorm rooms, etc.
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But except in very rare cases, a tax increase on a business good results in both (a) higher prices and (b) profit reduction — which would combine for the $78 million. So, it won’t ding every Masshole for $12.28, because shareholders will absorb some of that instead — including shareholders who don’t live in Massachusetts.
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The increase will be paid by both consumer and shareholder — and the latter half tends not to live in Massachusetts.
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You left out employees. They tend to take the hit from a corporate tax increase moreso than consumers and shareholders.
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Which makes perfect sense if you think about it.
but I don’t recall a salary decline showing up in economic theory. What you will see in economic theory, however, is that if the prices rise, supply falls. If supply falls, fewer employees are needed.
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Of course, that’s for widgets. In this particular case, a decline in customers of 1% will not reduce Verizon’s MA employment by 1%, because their poles still cover the entire state, etc.
…Corporations are owned by shareholders that may range from Japan to Timbuktu, and may include people in Massachusetts. It is all of them who would be hit by a closing of “loopholes,” not just people in Massachusetts.
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I’m all in favor of combined reporting, btw. It is not unusual for corporations with subsidiaries in multiple states to treat inter-subsidiary transactions so as to minimize income to the higher-tax states and increase income in lower-tax states. It’s essentially a fraud, and that’s why combined reporting is necessary to detect it.
Took me a while to figure out, but the ‘loophole’ crap is just a stalking horse. At least the biggest portion, $136 million –Combined Reporting– is. I can imagine the ‘pole parity’ tax passing, but the big stuff like combined reporting? No way.
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Combined reporting too complicated a change to win in 2007, and every other loophole is too small to fight hard to win.
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I sit on DOR roundtables from time to time, and the various rules and regulations that must be associated with Combined Reporting haven’t been raised. Not once. DOR knows (or thinks it knows) that it won’t pass. Yet. It’s 2008’s fight, or later.
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So I’ll shut up about the loophole that isn’t, and let Patrick claim credit when he gets the pole parity tax, so that the Boston property taxpayers get a break at the expense of all Verizon users all over the state. Here ya go Boston, together we can.
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The big issue (caution: threadgrab in progress) is brought to you by Keller: Pension reform. It’s the only cost reduction measure in the whole proposed damn budget. Such a simple and correct policy (it was afterall the concept of Ms. Healey), and it’s suffering ugly opposition.
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If Governor Patrick can’t muster the political force necessary to force underperforming pension plans into centrally managed PRIT, then that’ll tell you what the cities and towns really think of the Governor’s leadership.
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Keller:
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And yes, it’s a big deal. The idea that the municipal unions are defending their rinky-dink plans that get 3% a year when Cahill et al. are getting 12% is nuts on many levels — do they actually think they’ll have a pension with such low returns on the fund? Heck, it’s a matter of self-preservation on their parts, if nothing else.
Money managers often give all sorts of perks: Celtic, Patriots tickets; nice lunches. It’s hard for locals to part with that.
They didn’t cry for us.
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How is it considered to be “pro-business” to jack up the taxes on small businesses so that you can give a multi-billion corporation a tax break, one who decided to place its assets in Bermuda ownership? This type of chicanery is not attempted by mom and pop businesses, most would probably cringe at the thought of shirking responsibility in this way.
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I wouldn’t lose a wink of sleep if Verizon went out of business tomorrow.
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In that respect, we seem to be talking right past one another. One, or both or us, is missing something.
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I say, there’s only 3 sources for money: customers (you and me), shareholders (you and me) and employees (them…well, at least not me.) Employees includes the guy on the pole as well as the one in the boardroom. If it comes to a pay cut, I’ll bet the guy on the pole gets it.
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You say, Verizon should pay.
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If Verizon pays, it pays with other people’s money. If Verizon’s tax is raised, someone will pay: customers, employees or shareholders. Isn’t that right? Am I missing something?
Of those three sources, only one is not market-driven — profits. Verizon has limited ability to raise prices, and has limited ability to reduce compensation.
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Don’t bet for a minute that Verizon isn’t paying the least it has to in wages, and charges the most that it is able to charge in prices.
So, assume that the taxes reduce Verizon profit, which affects either shareholder return.
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WE own Verizon. Pension plans, 401(k) plans, individuals. We pay the price, whether WE are employees, customers or shareholders.
No, WE do not own Verizon. A “subset of WE” owns verizon. And that subset is more likely than not wealthier than the subset that does not own Verizon. That subset is smaller than, say, all the homeowners in Boston.
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So I guess this is a progressive way of getting money, isn’t it? And it’s voluntary too — if you don’t like your profits being reduced, sell. It’s easier to sell stock than to sell real estate.
Chances are good that you “own” Verizon if you do
And chances are that I’ll “miss” those profits a lot less than the extra property tax that I’m paying, because I own a lot more of my house than I do in Verizon stock.
This meme floated by gary and parroted by you is misleading.
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Shareholders own Verizon, including 401k owners, etc. But it’s not as if the shareholding is uniform — 10% of the individual shareholders likely own upwards of 50% of the stock.
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Furthermore, considering that VZ’s forward dividends are $1.62 a year and they have 2.91B shares, even if VZ had to pay the entirety of the tax out of shareholders, it would reduce dividends by a penny a quarter, based on the $140 million annual levy increase. So, if you own a 401k which has 10% of its holdings in Verizon (a high estimate), you’ve just cut your dividend return average by a tenth of a penny per quarter per share in your 401k.
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Let’s say you own 10,000 shares in your 401k, and they have the abnormally high 10% portfolio made up of VZ stock. You just got dinged $10 per quarter, total. If you own 10,000 shares of a 401k, $10 differential in returns per quarter isn’t even on your radar. If you own fewer shares, we’re talking about far less money.
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This claim that it hurts all of us because we are all shareholders is foolish.
1. Few people in Massachusetts own anywhere near 10,000 shares of Verizon (value: $37,000), the amount needed to lose out on $100 per quarter in dividends, assuming that all of the tax increase comes from dividends.
2. A very small percentage of the total shareholding in Verizon is owned by people within Massachusetts. Even if only Americans owned stock in Verizon, we’re still only 2% of the US population. With the tax increase, we’re effectively getting the other 98% of shareholding America to help out with our town and city budgets.
That make up the remaining 90% are mostly public and private pension plans and Mutual funds, which are the backbone of the 401(k) market.
Few people have 401ks with a combined personal holding of 10,000 shares of Verizon stock (about $37,000 in value). Those few people will lose $100/quarter. The rest will lose less — much less.
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For most people, you’re talking about no more than $3 a month, and for many people, you’re talking about $0.
Telephone service used to be fundamentally different from other services.
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It isn’t anymore. It’s just bits — 1s and 0s. So is cable television, cable telephony, Internet, IP telephony, and so forth.
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Since there are at least three technologies run over wires today which allow for telephone calls in the house (telco, coax, fiber), why should one pay less taxes than the other two?
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The property tax on the properties for telephone wire, coaxial cable, and fiber optic cable infrastructure should be the same, as a simple matter of fairness. If you want to argue that they should all be tax free, make the argument. To argue that one should get a discount that the other two don’t get is bad economic policy, since they have identical externalities.
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Your argument is essentially that because it’s a pole, it should bear the same tax.
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If the company is a “telephone company” and is a corporation, as in predominantly in the business of providing telephone service, then it has the same tax exemption on pole and attached equipment whether it’s fibre, copper or a series of cans mounted on poles and connected with fishing line. End of story.
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Telephone companies get an exemption. Non-telephone companies do not.
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My office refrigerator is taxed. The identical refrigerator used in the manufacturing plant to chill monomers is not. It’s covered by a manufacturing exemption.
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My car is taxed. Those cars owned by some charities are not.
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It’s policy. The policy question is: should telephone companies continue to receive an exemption or has the time passed where such subsidy is unnecessary. The argument is about policy. “Loophole” is spin.
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My argument is that telephone poles aren’t the only poles supporting telephone conversations, and telephone conversations aren’t the only thing on a telephone pole. So telephone poles are being treated differently, for no obvious reason. This “predominantly in the business of providing telephone service” is not well defined. What does “predominantly” mean? Do you measure by customers or revenue or bits served or what? How often do you reassess, to make sure Verizon hasn’t slipped into too much television/Internet business?
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Look: you can have what we would consider a telephone conversation (pick up a plugged in telephone, dial a telephone number, it rings someone else’s telephone) over lines that are owned by a telco (Verizon), a cable company (Comcast), or fiber run by an ISP (Covad). One group in those three gets a property tax discount.
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Likewise, you can do more things than have a telephone conversation on a telephone line, such as DSL. But you could also have an internet connection on coax (Comcast) or fiber (Covad). Here again, Verizon gets a discount the others don’t.
So given that there are at least three “kinds” of companies that offer telephone type services, and given that all three also offer other types of services, why are companies blessed as telcos given a discount merely because they’re telcos? There’s no modern-day rhyme or reason to it. The services of telephony, television, and Internet access are all blending. Why does one company get a discount when they’re all offering a bundle of user-end comparable products?
“Predominent” is well defined. It’s defined by Chapter 59 and numerous court decision. The Companies know who is exempt and they know what predominently means taking from the numerous court cases that use a “substantiality test” that has been used for nearly 5 decades.
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For example see: RCN-BecoCom, LLC v. Comm’r of Revenue, 443 Mass. 198 (no link, sorry).
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You could make your the same argument that there’s a water loophole under Chapter 59: Machinery employed in any branch of manufacture or in supplying or distributing water. Loophole! Loophole! There’s an exemption for water but not for the same equipment that pumping milk or soda.
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The reason for the break is that Mass wanted to encourage the spread of telephone, and clean water, and charities, and manufacturing. Each (telephone company, water company, charities, manufacturing) has its own tax exemption on stuff that you and I pay tax on.
all of those entititys which run wire on it would share in the additional tax burden.
That’s right. I was ignoring the rent aspect.
Let’s do what Ted Kennedy has suggested for many industries. Unregulate the phone company and all communication companies, see what the market will bear
and tax them accordingly.
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Senator Kennedy has always been on top of these things. Worked well for the airlines. Kennedy broke up AT&T. Let’s break up the phone companies again. Start taxing cell towers and antenna’s. Deregulating the power companies out west was a boon to the consumer.
“I recently got a job at Mass Mutual (now on the Forbes largest 100 corporations by revenue)”
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Did it ever occur to you that a tax increase which is what ( closing so called loopholes is) to Mass Mutual might have resulted in them to reavalute their budget and decide that there were to be NO new employees this year? So you win your tax loophole war but end up with no job. Brilliant!
I would assume that Mass Mutual hires people because they think that additional hirees will increase their revenues/profits, not because they have additional profits that they simply want to spend. It’s plausible that if their unrelated expenses were higher, Mass Mutual would have to hire TWO people in order to get to the same level of profitability.
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If you can make $50k in profit from one employee, and are pretty much content making $50k in profit, then you might only have one employee. But if you can only make $25k in profit per employee, but want $50k, then you’d have to hire two employees to do so.
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Most people (and people are behind every company) only work as hard as they need to get to the level at which they want to be; they don’t work infinitely hard in a quest to make infinite money.
“assumption” would earn a good grade at the Harvard “B” school……. ” I would assume that Mass Mutual hires people because they think that additional hirees will increase their revenues/profits.”
Is that always the case? How about the scenario where a single new hire becomes absolutely essential because 3 employees are gone through attrition and have not been replaced to cut expenses ( something NEVER done in the public sector)to create a more favorable bottom line…. that the choice is either hire a new employee to “shore up” the department” or eliminate the department all together?
To assume that # of employees is directly proprtional to the amount of profit is beyond naive thinking. Ever hear of the “law of diminishing returns”?
Any money taxes taken from Mass Mutual or Wal-Mart or other big corps will just be drawn away from people who are employees or customers, they say.
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But the deal is, with investments from the state in education and other services, we give economic buying power to more citizens. Better educated citizens will be better able to start their own businesses or work at high-paying jobs. They can spend more on good services. When state social services help keep a family healthy, then the workers in that family don’t miss wages due to missed workdays. We are not just redistributing the wealth, we’re investing to grow the whole economy.
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The argument that taxing the big guys just a little more will hurt everyone and won’t gain us anything reminds me of the argument against raising the minimum wage–raise the wage and more people will be unemployed.
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Well, Clinton & Dem. Congress raised the minimum wage in the early 1990s–and that sure didn’t mess up the economy then.
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Closing these loopholes won’t bring on another disaster–but it will give our government the resources to help more people.
I’m saying that the money in the customers, employees, and the shareholders’ hands will be used more productively than it would be used in the hands of the Massachusetts government. Those contrarily winged believe different.
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Fair enough?
The status quo of loopholes won’t get the needed resources to the cities and towns who need more local aid.
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Tax cuts don’t put out fires and they don’t educate children, and they don’t put criminals behind bars.
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Neither do tax increases at the margins.
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Government programs are great. It’s just that programs are run by tax paid bureaucrats, flawed individuals like you and me, but with poor incentives.
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This is a HUMONGOUS issue!!!
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It begs for much more attention so I’m very glad there are some very smart people focusing their efforts on this at the Center for Democracy and the Constitution (CDC). I can have a bit of hope for my kids’and our planet’s future because of this group and others like them: “We are Fighting to Abolish Corporate Constitutional Rights in order to Establish Democracy and Government Of, By and For the People. A couple poignant quotes from the CDC website
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blockquote>”A corporation has no rights except those given it by law. It can exercise no power except that conferred upon it by the people through legislation, and the people should be as free to withhold as to give, public interest and not private advantage being the end in view.” (quoted in Unequal Protection by Thom Hartmann)
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-William Jennings Bryan, Orator and Presidential Candidate
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“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country . . . corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”
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-Abraham Lincoln, President of the United States, 1864
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Click here for more quotes
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Lincoln never said that about corporations.
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It would have been nice if he did, though, because it’s going to take someone with the moral authority of Abraham Lincoln to help ordinary voters get back some of the influence on government that corporations now have.