Blue Mass Group

Reality-based commentary on politics.

Waiting for arithmetic

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Must read: DiMasi says no to closing tax loopholes:

While DiMasi has previously expressed reservations about Patrick’s corporate tax changes, his comments yesterday were his strongest to date. Speaking to the chamber, DiMasi drew applause when he declared: “Let me be clear on this important subject: The budget that the House Ways and Means Committee releases on April 11 will not rely on new revenue from businesses.”

Except that he does entertain ending the property tax exemption for the phone companies. Hrrmmm… No word from DiMasi on how he’s going to balance the budget. Arithmetic is a harsh mistress…

Speaking of which, what’s up with Whirling Dervish Mike Widmer, spinning like a top?

Michael J. Widmer — president of the Massachusetts Taxpayers Foundation, a business-backed think tank — has frequently criticized politicians’ tendency to dip into reserves rather than find permanent solutions to the state’s financial problems. But yesterday he said that given the choice, it would be better to dip into reserves than change corporate taxes to balance next year’s state budget.

“The key here is building jobs, so if we hurt job creation with the fourth [corporate tax] increase in five years, we’ll just be in a worse situation down the road,” Widmer said.

So, dipping into the rainy day fund is bad … unless that money has to come from us!! Quick, break the piggy bank!! Nice fiscal discipline. Nice forward thinking.

Building jobs takes investment, right? What infrastructure or education needs should we shortchange — or what fiscal crisis should we risk — to keep the relatively cushy status quo? Let’s be clear: Widmer is helping his pals fight a rear-battle, not looking forward. If business wants a good business climate, at least in part it has to help pay for it. We can’t have it all be private gain and socialized cost.

I don’t think this is the end. DiMasi obviously wants to avoid the impression that the legislature is ready to raise taxes, but by proposing the loophole-closing to begin with, hasn’t Patrick already taken much of that responsibility off of him? And doesn’t DiMasi need to play ball with many legislators who will be reluctant to sacrifice their priorities in the budget? How strong is Sal’s hand?

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One more thing: You notice how much lobbying and special interest groups are quoted in articles like this. There’s a “business-backed think tank”, much talk about the business climate, and then near the end a quote from the “liberal” think tank.

What about the “employment climate”? The “education and training climate”? The general quality of life? What about the effect on jes’ folks, and the most vulnerable? Does the media give the public the information that will affect them, or is it just a box score of mammoth special interests duking it out like Godzilla and Mothra, far beyond the influence of mere mortals?

This is a fine article by Michael Levenson, and I don’t mean to pick on him at all: After all, he’s just reporting on what’s actually happening on Beacon Hill. But it’s just something to keep an eye out for. What about the rest of us, who don’t have the ability to dial up a Tom O’Neill to twist the Speaker’s arm?

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Comments

  1. Exactly, Charley.  The rest of us don’t have the money to hire lobbyists to get us tax loopholes.

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    And just how much do these lobbyists cost their clients?  Maybe it would be better for Mass. education, social services and first responders if the money that went to lobbyists instead went to revenue.

  2. which is to call up your state Rep. and Senator at 617-722-2000 and leave a message.  Then most likely what it means in my district is waiting to be totally ignored by Rep Sanchez and Senator Wilkerson.

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    I did make the call and request their support for closing corporate tax loopholes, asking them to not make program cuts or use the rainy day fund to balance the budget until corporate taxes are collected fairly. 

    • Wilkerson about taxes. Isn’t it patently obvious that Ms. Wilkerson has little or no knowledge re taxes? She also doesn’t know what a CPA or a tax consultant is either.

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      I guess she should be appointed to some DOR committee.

      • I voted for Sonia Chang Diaz (and my husband worked his butt off for her campaign the last few weekends while I took over childcare for our 2 kids)

        • I always thought Sonia Chang Diaz was a Wilkerson Plant, to make sure that Samiyah Diaz didn’t win the Dem primary.  I may be wrong but the similarity in name is too close.  Having been involved as an observer in a write in recount before, just the name Diaz would have given the vote to Samiyah but with Sonia in there the will of the voter would have been muddled.

  3. you say,
    “No word from DiMasi on how he’s going to balance the budget. Arithmetic is a harsh mistress”

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    Are you that naive to think that the house doesn’t have thier own budget that adds up?

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    Everyones an idiot I guess, if they don’t embrace everything the new governor proposes.

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    i suggest you watch this budget debate from the sidelines. wait until it is over in july, or august, or…
    before you comment. Deval is going to be schooled.

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    I am more excited about patricia murray and sal butting heads

    • This one

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      or

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      This one?

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      Don’t see why DiMasi would have anything to do with either one, frankly.

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      I can’t speak for Charley, but I’m sure the Senate does have its own budget. I think there is significant reason to question the wisdom of cutting programs (depends on the details of course) and dipping into the state’s “rainy day fund” rather than closing tax loopholes.

  4. If we’re going to win this fight, we have to talk about the specific loopholes, not just about loopholes in general, or, worse yet, business taxes in general.

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    The Herald did an entire article on this subject and didn’t mention the specific tax loopholes once. However, the meme that “business taxes are the anathema to economic expansion” was repeated over and over.

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    For the record, here are the loopholes, quoted from a Globe article on Feb 16, 2007:

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    1. Combined reporting. Advocates of combined reporting see it as a comprehensive approach to closing corporate tax loopholes by making it more difficult for corporations to shift profits to low-tax states like Delaware. Currently, companies with multi-state operations in Massachusetts pay taxes based on a calculation of the property, payroll, and the sales they have here. Combined reporting would require corporations, when filing their tax returns, to list all of their profits, including any subsidiaries, and apportion the tax to more accurately reflect the size of their business in Massachusetts. Seventeen states, including California and Illinois, currently use combined reporting. New York’s new governor, Eliot Spitzer, has also proposed it in his new budget. Expected new revenue: $200 million a year.
    2. “Check the box.” Romney at first proposed, and then rejected, this tax change. Massachusetts is one of the few states that allow companies to claim different corporate structures when filing federal and state tax returns. For instance, a company can file as a corporation when filing its federal tax returns and as a partnership for its Massachusetts returns, sometimes lowering its state tax. The revenue department wants to force companies to make a consistent choice. Expected revenue: $100 million to $150 million a year.
    3. One proposal would tax the non-insurance business of insurance companies at the same rates that other businesses are taxed, eliminating the special treatment insurers are now allowed.
    4. Another proposal would prevent sellers of real estate from avoiding the deeds excise tax by placing the property in a partnership and then selling an interest in that entity.
    5. Another proposal would extend the state’s sales tax to digital music, photographs, and printed materials in the same way the state did on software three years ago.

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    Anyone even remotely associated with a business is going to oppose “increased business taxes”, which is how these are being referred to by their opponents. Many are opposed to “closing loopholes” because they think that they will pay higher taxes because of it.

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    However, would a small business owner support subsidizing a large corporation doing business in many states is able to shift their accounting around so that their profits are taxes in low-tax states?

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    Would a small business owner support subsidizing large corporations that assume different corporate structures solely to reduce the amount of taxes they pay in Massachusetts?

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    Would a small business owner support subsidizing insurance companies by giving them lower taxes than himself?

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    Would property owners support subsidizing savvy real-estate players who play legal games to avoid being taxed on their transactions?

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    [The last one (extending sales taxes to digital music, photographs, and printed materials) seems to not be all that much of a loophole, so I won’t defend that one.]

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    If certain corporations are allowed to escape taxation via loopholes, this means that we are either making the other businesses pick up the slack, or we are going without services that we think will benefit our state. Is either a good or fair tradeoff?

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    We need to stop talking about the generic “close loopholes”, because people think that they will wind up paying more in taxes because of it. They won’t. These loopholes need to be closed because they are unintended, and because they give large multinational corporations advantages over smaller local businesses.

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    I expect that the bulk of the public opposition to this is either due to people who are uninformed, or people who are opposed to any and all form of business taxation out of ideological principle. That latter group is not nearly a majority in this state, we should not kow-tow to their principles.

  5. The theme that corporate taxes hurt economic expansion is frequently mentioned in Boston newspapers, and it is perpetuated by the Mass. Taxpayers Foundation. Widmer has a reputation to uphold, not to the Commonwealth of Massachusetts, but to his business buddies.

  7. (i) This isn’t an either/or situation–either (a) amend provisions of the state tax code that are considered loopholes or (b) use the state’s rainy day fund.  State government could be come combination of the two.

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    (ii) The state’s rainy day fund is just that–a rainy day fund.  Excess tax revenue collected during good years to cushion the deficits in the bad years.  That’s why the excess tax revenue (over that necessary for expenditures during the year in which the revenue was collected) was saved and not refunded to the taxpayers. 

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    If the state’s financial situation this year is as bad as has been suggested, it would appear that the rainy day fund should be tapped to offset at least some of the deficit.  The rainy day fund shouldn’t just be sitting around gathering dust–or interest (I presume it’s invested)–for eternity.

    • But shouldn’t we see where we stand w/o depending on the rainy day fund first? I don’t think we should use the rainy day fund just because it’s there.

  8. 2006.  Facing a deficit, Governor vetos Legislature’s grab from Rainy Day Fund.  Governor Patrick reverses Romney.  Braintree celebrates by building a gazebo.

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    Circa 2006. The Globe endorsed Patrick this week because he is savvy enough to understand these numbers and offers a possibility of ending the Republican-Democrat impasse on Beacon Hill, which in the guise of two-party government has often resulted in unilateral actions by the governor and unrestrained spending by the Legislature. A Democratic governor with the skills Patrick possesses and the mandate he deserves should have better success at convincing the Legislature to use taxpayers’ money responsibly.

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    2007.  Facing a deficit, Governor [does this ________ in response to the] Legislature’s grab from Rainy Day Fund.  Gazebo builders await their fate.

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    • “Arithmethic is a harsh mistress.”  Love it.

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      History is a bad date, English is the girl next door, Phys Ed ….

      • …the title of the post may be a play on the title of the Robert Heinlein book The Moon Is A Harsh Mistress.  IMHO, the last good book Heinlein wrote.

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