I don’t wanna bore you with this/oh but Scot Lehigh Scot Lehigh Scot Leeeehigh…
POLITICIANS, PAUL Tsongas used to warn, too often treat the business sector as though it’s an ATM machine, tapping it constantly for cash without worrying about replenishing the account.
That’s a pretty fair description of what’s been happening here in the last few years.
… There’s a tendency among some to see the private sector as a rich (and selfish) realm that can be taxed with little consequence. Certainly the governor has presented his tax changes as mere loophole closings that should have no ill effects. But basic economics tells you that an increase in the business tax burden has to be felt in one or more of the following ways: The price of products and services will rise, or there will be less money for wage increases, or profits will fall.
Uggggghhhh. Scot, let’s think this through: OK, you’re right, there are unintended consequences to raising corporate taxes/closing loopholes, whatever you want to call it. Sure. There are also consequences to leaving property taxes the way they are. There are consequences to not investing in all-day kindergarten (for instance), or trains, or public universities. There are consequences to dipping into the rainy day fund. Everything’s got consequences, OK?
So as Lehigh later deigns to point out, MA is still 40th in corporate taxation. So even after the litany of really bad stuff that Romney did and Patrick’s proposing … we’re still dealing from a position of strength. And would Lehigh like to defend the actual litany of loopholes that Patrick proposes to close? Let’s be specific, huh?
Our problem is our overall cost of doing business, including things that are largely out of the state government’s control, like the cost of real estate. But Gov. Patrick seems to realize that it’s not just the cost of doing business in MA that we need to address; it’s the cost/benefit ratio. You just can’t have our Greater Boston economy in Ohio or Alabama, for instance. The things we have to offer are an amazingly well-trained workforce, good schools, mature infrastructure, etc. So we’ve got to play to our strengths. If MA isn’t going to be cheap, at least it can be high-value. We’re losing that edge, too.
(And does Lehigh have a plan for shoe-horning municipal unions into the Group Insurance Commission? I’m all for it, but maybe there’s a reason this wasn’t the first thing Patrick did; maybe it’s not the low-hanging fruit we think it is. Don’t know.)
I guess Lehigh has been to one too many Chamber of Commerce meetings.
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In my town we have a split tax rate with business paying about $22/1000 and homeowners about $11/1000 and every year I watch the tax rate setting hearing and every year whether the economy is good or bad I listen to the Chamber of Commerce types moan how the increase in property taxes is killing business and how they should catch a break.
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And after our Selectmen agree to some sort of compromise, that no one understands, on the tax rate I leave the tax hearing in my old Chevy and see the Chamber of Commerce types leave in the BMW 760s and Cadillac Escalades.
He had more important things to do than research and think out a column for the paper.
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Can’t a guy just scribble something and send it in once in a while?
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Or once a week?
If we don’t have enough revenue and keep a great infrastructure/school system/etc… or let everyone catch up, what happens then? Suddenly, we’re expensive and mediocre in all other important areas.
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Scot Lehigh has never been one of the better writers in the op-ed section (not that there are tons of fantastic ones, but I generally like James Carrol. I used to really like Thomas Oliphant, but I don’t think he writes for the Globe anymore. Vennochi is very hit or miss.)
Oliphant was forced out by the NY Times and accepted a retirement buyout (damn new yorkers). I, too, like him and miss seeing him on the op-ed page. His wife works for CBS and when I was there my boss was good friends with him.
I don’t understand why he was forced out. He was really the only columnist they had who specialized on national politics – something I think a paper that tries to be a national paper should have, lest it just be a regional paper (at best).
…It is doubtful that the Glob would be able to support an investigative team such as the one that broke the RCCi (Roman Catholic Church, Inc.) priest sex abuse scandal now. The Globe has become little more than a portal for various news services, plus a few op-ed columns (including the column by the idiot Jeff Jacoby–why they don’t get rid of him and hire a reporter, I’ll never know).
I’m a big fan of that movement to buy the Globe back from the Times. They did the Globe no favors.
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So Oliphant’s departure was a money reason, then?
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What I’d do to never see Jacoby print another hack piece again… his columns are just asinine. I don’t get why they hired him (and Cathy Young) when there are so many conservatives out there for a column.
…He was about the only reason to listen to Franken’s show. Franken himself was boring as a talk radio host, but his regular guests were good.
He was often on the News Hour with Jim Leher, as well. I haven’t watched it in months, but he would take the place of Mark Shields on Fridays sometimes.
I guess I’m just a gender-neutral nut.
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But, that aside, excellent post. I think this question of tax equity is extremely important, and I will be writing up my findings after I do a bit more research (stay tuned!).
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Among the things I’ve found so far are that the business community in MA pays way less than what in most states would be considered a fair share.
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A recent blurb by the MBPC folks cites some studies that rank MA 47th among the states in terms of the share of taxes paid by businesses. I’m not a specialist in this area, but I am an economist, and I can do simple math. Adding in the less than $300 million the Guv is proposing to recapture might move us up 2 or 3 ranks, but we’d still be way below the national average.
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New Hampshire, that bastion of no taxes, ranks 7th in business taxation, with 55% of its budget supported by business taxes, as opposed to 36% here in the Bay State. Imagine if we added 20% of our budget in business taxes without changing anything else — we could fund everyone’s pet project! Ain’t gonna happen, of course, but my point is that it’s hard to shed too many tears for the MA business community over the rate of business taxation.
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Besides, this whole “tax fairness” initiative is not about increasing the rate if business taxation; it’s about making it equitable.
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As you may remember, I had the honor of serving on the Economic Development working group during the transition, and we had several relevant findings:
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1) 80% of jobs in MA are held by people who work for companies that employ fewer than 500 people (these are not likely the companies that are taking advantage of the tax-reduction strategies being targeted).
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2) The greatest barrier to job growth in MA is a shortage of talented employees.
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3) The next most important barrier is poor infrastructure.
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Taxes were not even on the list.
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I like the Chevy/Beemer story. So true.
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More anon.
Let me see, the corporations who want to relocate to Venezuala raise your hands. how about China? how about Russia? Bosnia, Greece, Argentina? pick a country in africa? How about Iran ? Iraq now there a corporation would get a lot of tax forgiveness an dincentives to relocate, so have at it.
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The reason they are not there is simple: they like the living here in the US but they want the taxpayer to pay for it. So all the cost they can shift for infrastructure, roads, schools, health, education have and will be shifted to the individual taxpayers.
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But for the making of the new exconomic depression which will be fueled rapidly by the hole we have in the bottom of our economy it was a slick idea.
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The introduction of cheap labor means that the middle classs will slide into the cheap labor pool and then we can no longer get the tax money we need to suppot the corporate giveaway. So the corporations with the so called congress have set in motion the demise of america as we know it.
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There is no pendulum that will swing back and make us whole again, this is it. The illegals will keep coming because our government will stop them, even though they are dropping the bottom out of our economy.
What does local government do? build day labor hiring sites so employers can come by and hire an illegal.
What a stupid statistic. It’s like ranking the states by weather and saying that Mass has the 29th best.
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Truth varies.
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-I have the E&Y report (most recently published 2/07). Nowhere in it is Mass ranked as 40th anything–that’s the (MBPC) Mass Budget and Policy analysis based on data in the E&Y report. Oh I forgot, MBPC is “nonpartisan”.
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-Cato takes the report and concludes that spending has grown faster than inflation and it’s been paid for primarily by business. Cato is non-partisan.
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-Massachusetts Taxpayers Foundations (MTF) shuffles the data differently and concludes that Mass is a very high business tax state. Associated Industries of Massachusetts (AIM) does the same. Both non-partisan.
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The Federal Reserve weighed in as arbitrator (published 8/04 based on 2000 data), and concluded that
Gary, can you explain the Fed’s remarks, and provide a link? “Fairness is unclear” is itself unclear to me.
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Anyway, the larger point is that the MA business climate is dependent on a heck of a lot more than taxes. Lehigh’s column seems to be a pretty transparent “I’m all right Jack/keep your hands off of my stack”, without any real consideration of what ought to be done instead. Again, the point is to raise revenue with the least damage done to everyone’s quality of life, which includes the business climate, to be sure.
Paper. Loooonnng paper.
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I may scan it in but for now, I’ll type for a bit, until I get bored…From the paper, tax “fairness”, as a matter of policy, is determined by:
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1) Ability to pay. How the burden should be divided among households. “ability to pay”. The presumption here is that businesses don’t pay tax, people pay tax. That is, individuals who own businesses, employed by business, customers and vendors are the folks who pay greater business tax.
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i.e. A tax on business is borne more by a CEO and shareholders than a schoolteacher, therefore as a matter of policy, if the politician decides it’s “fair” to tax the wealthy a higher corporate tax probably does just that.
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2) Adequacy. The rate of growth in a particular tax should, absent a good reason, grow at a rate that approximates revenue growth.
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Corporate income tax has lagged revenue growth.
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BUT, Government Revenue has grown dramatically in Massachusetts, mainly from entitlements.
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Individuals who are employees of the government have received the benefit of these entitlements.
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Who should pay the cost? 1) a broad based individual tax 2) To the same effect, a shift of the cost to the government employee in the form of a less entitlements 3) a business tax which is by definition paid by business owners, employees, customers and vendors.
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3) Competitiveness. i.e. compare to other states. This variable is extremely subjective, complicated and measured using different models, all of which have their own criticisms.
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This is the source of MBPC’s 47th place ranking. MBPC uses BSH (A measure of total state and local taxes paid by business EXCLUDING personal income tax on those profits).
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BSH puts Mass among the lowest in the nation. Here’s the problem with that. Mass business is labor intense: health care, banking, finance, high tech–high skilled employees.
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The wages are high, the personal tax is high, the amount EXCLUDED from the BSH is high, making the BSH low. It’s 47th. But that alone isn’t very meaningful.
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It’s also the reason why Massachusetts is so dependent on property tax as the primary local revenue source. Not because business isn’t paying its share, but rather because business pays out so much of its incomee to its employees.
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Anyway, that’s my take. A dozen or so paragraphs to summarize a 51 page report. If there’s any interest I can PDF it and post it.
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Here are some more stupid statistics for you:
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According to the COST study,
(from the MBPC paper noted earlier)
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also, things are getting worse:
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and, the Federal Reserve study you mention
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and your point was?
I think I made my point. Stand up and claim that mass is 47th is pandering for soundbites. Line up AIM, MTF, MBPC and Cato and let’s have a food fight.
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Federal Reserve says “fairness of Massachusetts busienss taxes is unclear”. I take the Fed at its word.
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You’d conclude based on your stats that the Fed is in error and that business taxes are unfairly low?
This discussion started out as a inquiry into the Guv’s proposal to close some tax loopholes. You seem to be trying to change it to a general discussion of the level of business taxation. Fine, but MY point was that even if the loopholes are closed, the level of business taxation in this state will still be pitifully low.
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Unfairly low? Yeah, I’d say so, but that’s a different issue. Businesses complain about the lack of qualified workers, so really shouldn’t balk at paying their fair share to improve the quality of education in the state, wouldncha think? They complain about the lack of infrastructure (broadband internet, cellphone coverage, public transportation, etc.), so, again, shouldn’t mind paying a bit more to see these problems addressed.
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I agree that rankings in and of themselves don’t mean much, but the ones I cited say to me that we’re a long way from the real pain threshold.
You feel taxes are too low. Mass Budget and policy has the same take. MTF and AIM disagree. Federal Reserve straddles the fence, and that’s probably the answer to the question are business taxes too high.
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Answer: “it depends”.
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My take on the Governor agenda is that he needed $300 million quick cash to balance the budget. He didn’t want to do it in cuts, or cost savings; couldn’t turn to the individual tax rate. He saw the business tax as the lowest hanging fruit.
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The “we’re 47th” however misleading is good for soundbites as is the “close the loopholes”. But that’s just the marketing campaign, not reality.
but couldn’t leave your statement unchallenged…
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$1.3 billion projected deficit
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addressed with:
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$295 million unintended corporate tax benefits (“loopholes”)
$515 million spending reductions (“cuts”)
$174 million expected higher revenues
$166 million enhanced cash management, etc.
$225 million from reserves directly or indirectly
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So, nowhere do you see any increase in business taxes.
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21% of the deficit solution comes from creating corporate tax fairness, which will benefit at least 80% of the corporations in the state.
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The “cuts” you claim he didn’t want to do account for nearly twice that amount (37%). So, please qwitcher bitchin and make some positive suggestions about how this could be done better.
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Remember, Governor Patrick inherited this problem, he did not create it.
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And yet, the taxes increase. Go figure.
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“Massachusetts is ranked 47th in business taxes.”
I believe this is what Gary is referring to.
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I’ve read through it a couple times, and from my layman’s perspective, this is what I get from it:
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MA business taxes are low, but taxes are only one part of the cost of doing business in the state. Real estate costs and high salaries also contribute. One also needs to look at the base over which a company can distribute costs. A company that sells products can distribute costs to a world-wide base. A company that delivers services locally or regionally (health care, tourism, brick and mortar retail…?) can pass these costs to a limited population.
I subscribe. Paper. Old school. Thanks for the link.
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I’m a bit confused by this. I didn’t read the Lihigh column, but I thought this was included in the Munical Partnership Act:
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between “allow” and “require” that Lehigh and others have complained about.