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Why the 'Millionaire Tax' Will Hurt Jobs

Posted by John Regan on Jan 19, 2016 7:30:00 AM

Editor's note - John R. Regan, Executive Vice President of Government Affairs for Associated Industries of Massachusetts (AIM), will deliver the following comments today to the Joint Committee on Revenue in opposition to H.3933, An Initiative Petition for An Amendment to the Constitution of the Commonwealth to Provide Resources for Education and Transportation through an additional tax on Incomes in excess of One Million Dollars (Ballot Initiative 15-17)

ManufacturingWorkerSmall.jpgIt is no accident that we call ourselves a “commonwealth.” 

The preamble of the Massachusetts Constitution says, “the body politic is formed by a voluntary association of individuals: it is a social compact, by which the whole people covenants with each citizen, and each citizen with the whole people.”

This notion is affirmed in the language of Article XLIV of the Constitution, which states that taxes “shall be levied at a uniform rate throughout the commonwealth upon incomes derived from the same class of property.”

Now comes this petition for an amendment changing the language of Article XLIV in a manner that would increase by 78 percent taxes paid by those with incomes in excess of $1 million, adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets.

As a mathematical proposition, those earning $1 million of income per year currently pay 95 percent more tax than those making $50,000 annually. Income of $50,000 generates a tax obligation of $2550, while the $1 million dollar income generates $51,000 of income tax (all things being equal).  According to the ballot question language, every dollar of income above a million will be subjected to a surtax of 4 points over the current 5.1%

Since the procedural options for the committee are limited, AIM will leave to the wisdom of the voters the equity and advisability of a 78 percent increase of the tax obligation for fewer than 1 percent of our fellow citizens 

Some facts are important to note:

  • This significant new tax burden will fall on individuals and certain business entities paying taxes at the individual rate; it is hard to imagine that this new obligation will not impede investment, employment and certain locational decisions.
  • The Department of Revenue estimates (with some assumptions) that the proposal could generate $1.6 billion to $2.2 billion, with $1.9 billion identified as the median.
  • The $1.9 billion tax increase would be paid by roughly 19,500 filers, 80 percent of whom are anticipated to file with some business income.
  • Those 19,500 filers represent half of 1 percent of all tax returns filed with the Department of Revenue.
  • Eighty-six percent of the affected taxpayers would be married couples filing jointly, and 11 percent would be individual filers with earnings of more than $1 million.

Many advocates for this ballot question focus on the revenue derived therefrom as opposed to the uneven method of its generation.  Setting aside the fairness, or lack thereof, I would like to turn to the issue of how the new revenue is to be used.

The language of the question states that the revenues raised by the new tax shall be used “…to provide the resources for quality public education and affordable public colleges and universities, and for the repair and maintenance of roads, bridges and public transportation, all revenues received in accordance with this paragraph shall be expended, subject to appropriation, only for these purposes.”

Section 2 of Article XLVIII of the Constitution clearly enumerates so-called “Excluded Matters” by stating in part, “No measure… that makes a specific appropriation of money from the treasury of the commonwealth, shall be proposed by an initiative petition…”

So for the question to be constitutionally valid, the legislature would retain the ability to use the new revenue derived from the 78 percent tax increase for any public purpose the legislature deems appropriate. 

Any representation about how the money is used is wishful thinking that the constitution itself prohibits.

Last week, the commonwealth was successful in landing the eight largest corporation in the world to Boston.  This company is leaving its current home state in part because of concerns about unfair taxation.  We should look long and hard at this question that raises so much from so few and ask, does this imbalance make the commonwealth a better, or a worse place?

AIM would suggest that it makes Massachusetts an unfair place.

Topics: Massachusetts economy, Taxes, Jobs

State Unveils New Tax Filing System This Morning

Posted by Dana Ackerman on Nov 30, 2015 7:30:00 AM

Editor’s note – Dana Ackerman is Taxpayer Advocate for the Massachusetts Department of Revenue.

As the Taxpayer Advocate for the Massachusetts Department of Revenue (DOR), I am pleased to announce that DOR is today rolling out a new online tax system called MassTaxConnect. Starting this morning, the new system replaces DOR’s existing e-filing system, WebFile for Business.

Finance.pen.smallMassTaxConnect will be available to individual income taxpayers by 2017.

MassTaxConnect represents a significant investment in information technology that will benefit DOR, taxpayers and the business community. DOR employees will benefit from a centralized system allowing for enhanced and speedier customer service to business taxpayers across the commonwealth. Taxpayers will benefit from a system that will enhance voluntary compliance and allow for efficiencies that our current system cannot host.

And perhaps most importantly, the business community will benefit from a modernized system that will make filing and paying taxes in Massachusetts simpler, quicker, and more efficient than ever before.

MassTaxConnect retains a number of important functionalities currently available in WebFile for Business. For example, MassTaxConnect will continue to allow taxpayers and practitioners to schedule payments, to choose to file early, and to benefit from automatic calculations and error alerts. Filing taxes with DOR will continue to be free with MassTaxConnect.

The new system offers a range of new benefits to business taxpayers and practitioners, including the ability to send secure messages, a simplified process for amended returns, assigning third-party access electronically and access to most business taxes in one spot for filing and payment. Existing WebFile for Business users will be able to log in to MassTaxConnect today with their existing WebFile for Business username and password. We’ve also created this webpage that has everything you need to know about registration and enrollment, MassTaxConnect FAQs, and other important materials.

Associated Industries of Massachusetts has played a significant role in supporting the development of MassTaxConnect. Paul O’Connor, Director of Taxes at EMD Millipore and Chairman of the AIM Taxation Committee, led a group of AIM-member tax professionals that met with DOR over three years to ensure that the new system met the needs of business taxpayers of all types of sizes.

Modernization isn’t merely technological. MassTaxConnect is not only an upgrade to our information technology infrastructure, it’s also a deliberate effort and conscious investment on our part to rethink tax administration in Massachusetts. As you can see in this sneak peek at MassTaxConnect, it  is adaptive, holistic and the result of years of work, sound policy, and planning.

The business community is essential to a healthy and prosperous commonwealth. MassTaxConnect takes us another step closer toward making Massachusetts a great place to do business, and I hope that you will find it a welcome upgrade when you visit the site this morning.

Topics: Massachusetts economy, Massachusetts employers, Taxes

Attorney General Certifies Graduated Tax Amendment

Posted by Brad MacDougall on Sep 2, 2015 12:53:56 PM

Massachusetts employers are profoundly disappointed that Attorney General Maura Healey today certified an ill-considered proposed amendment to the state constitution that would impose a surtax on incomes of more than $1 million.

statehousedomeAssociated Industries of Massachusetts (AIM) believes the proposal would cripple a state economy that relies heavily on tens of thousands of subchapter S corporations and other entities that pay taxes at individual rates. The association also argued before the attorney general that the proposal violates the state constitution’s prohibition against ballot questions creating specific appropriations.

An Initiative Petition for an Amendment to the Constitution of the Commonwealth to Provide Resources for Education and Transportation through an additional tax on incomes in excess of One Million Dollars represents an appropriation, according to AIM, because it requires the legislature to use revenues from the surtax exclusively for transportation and education. The proposal could appear on the statewide election ballot in 2018.

Healey certified one other constitutional amendment and 20 referendum questions this morning. The referendum proposals, which could appear on the 2016 ballot, include ones calling for the expansion of dysfunctional renewable-energy targets and financial penalties for retail stores or fast-food restaurants that change an employee’s schedule within 14 days of a shift.

The attorney general did not certify several versions of a proposed constitutional amendment specifying that corporations are not people and asserting the right of the courts to limit political contributions.

Proponents of the $1 million earnings surtax will have to collect 64,750 signatures from registered voters to move the process forward. Then one-quarter of the state Legislature must vote to advance the proposal, in two consecutive legislative sessions, before it can go to the voters in November 2018.

The initiative would scrap Massachusetts’ current flat income tax under which everyone pays at a rate of 5.15 percent — and create a two-tiered system, with all income above $1 million taxed at four percentage points more. The result would be an 80 percent tax increase on that income.

Massachusetts voters have repeatedly rejected efforts to impose a graduated income tax. The last effort, in 1994, lost by a two-to-one margin.

“We believe that ballot questions are a clumsy and inefficient way to make public policy,” said John Regan, Executive Vice President of Government Affairs at the association.

“Employers remain particularly concerned about a constitutional amendment that would limit the ability of employers to create jobs by draining investment capital out of the private sector and into bureaucratic government programs.”

Proponents argue that the tax will target people whose paychecks top $1 million annually. But the change will also effect capital gains, interest, wages, business and other types of taxes on individual company owners. Among the companies affected would be partnerships, limited liability corporations, sole proprietorships and subchapter S corporations.

The amendment would make Massachusetts’ top rate one of the highest in the country, according to figures compiled by the Tax Foundation, a non-partisan think tank based in Washington.

Promoters of the initiative include some of the most powerful unions in the state: SEIU, the Massachusetts Teachers Association, the American Federation of Teachers-Massachusetts, and the Massachusetts AFL-CIO.

AIM members interested in learning more about the proposed amendment may contact AIM Government Affairs at 617.262.1180.

 

Topics: Massachusetts employers, Taxes, Ballot Questions

Compromise Reached on Controversial Tax Change

Posted by Brad MacDougall on Jul 17, 2015 12:22:00 PM

Governor Charlie Baker, legislative leaders and the business community have reached a compromise on the controversial corporate tax change that was inserted into the state budget to pay for an extension of the Earned Income Tax Credit for low-income workers.

StateHouse-resized-600The agreement means the so-called FAS 109 deduction will be delayed for five years instead of repealed, as recommended a week ago by the legislative conference committee hammering out a budget for the fiscal year that began July 1. The time period over which a company may claim its overall deduction will be increased from seven to 30 years.

The deal follows several days of intense negotiations among employers, business associations, the Baker administration, House Speaker Robert DeLeo and Senate President Stanley Rosenberg. Associated Industries of Massachusetts supported the expansion of the earned income tax credit (EITC), but opposed the repeal of the FAS109 provision.

“We all agree that expanding the Earned Income Tax Credit is a critical tool to provide tax relief to over 400,000 low income individuals and working families and my administration believes in providing a stable, competitive business climate to encourage economic development across the Commonwealth,” Baker said.

“In that effort, we have reached a joint compromise to extend the delay of the FAS-109 deduction implementation for five years and extend the length of the deduction’s life from seven to 30 years, minimizing the annual revenue impact on the state budget.  I am pleased the legislature is ready to act on these new parameters for the FAS-109 deduction by the end of July.”

Verizon and other companies that stood to be affected by the repeal, expressed support for the compromise.

"Governor Baker, Senate President Rosenberg and Speaker DeLeo continue to find ways to work together to address some of the tough problems facing our Commonwealth. Increasing the Earned Income Tax Credit helps low income workers when they need it the most,” said Donna C. Cupelo, Region President – New England for Verizon.

“Embracing a new approach to the FAS 109 provision recognizes that we have capital-intensive companies that steadily invest in the infrastructure that forms the platform for our economy.  When we match fair policies with the right investments in people and infrastructure, we make Massachusetts a stronger global competitor. "

Employer groups, including AIM, also applauded the agreement.

“As representatives of the state’s business community, we applaud you for finding a solution that both preserves the 2008 agreement on the FAS 109 deduction and extends tax relief to the state’s hard working residents by raising the state’s Earned Income Tax Credit,” said a letter sent within the hour to Baker, DeLeo and Rosenberg from Associated Industries of Massachusetts, the Massachusetts Taxpayers Foundation, the Massachusetts Business Roundtable and the Greater Boston Chamber of Commerce.

“This agreement provides certainty for the state’s businesses regarding the FAS 109 deduction for several years, and such predictability is critical for economic growth and business development. We are grateful for your recognizing this, for the collaborative manner you brought to these discussions, and for the hard work of your dedicated staff.”

Proposed repeal of the deduction of the FAS 109 deduction would have reversed an agreement reached between business and the Legislature as part of the 2008 “combined reporting" tax policy change. The repeal would have caused significant financial harm to capital-intensive national and global companies.

The combined reporting law brought income from companies' operations in other states into a unitary or "combined" Massachusetts return. The FAS 109 deduction was adopted to avoid penalizing companies after the fact for making capital investments. FAS 109 is an accounting standard that requires that financial statements reflect the tax consequences of all book/tax differences.

The governor signed most of the remaining $38.1 billion Fiscal Year 2016 budget, which includes no broad-based tax increases and makes substantive public-transportation reforms.

The MBTA reforms included in the budget provide Baker with many of the tools he is seeking to overhaul the transit agency. The budget would suspend for three years the onerous privatization vetting of the Pacheco Law, give the secretary of transportation the authority to hire an MBTA general manager, increase the size of the state Transportation Board and create a temporary fiscal and management control board for the T.

The governor also made $162 million in line-item and outside sections vetoes, including $38 million in earmarks. 

Topics: Taxes, Charlie Baker, massachsetts legislature

Budget Plan Includes T Reforms, Troubling Tax Reversal

Posted by Brad MacDougall on Jul 8, 2015 11:17:00 AM

A proposed $38.1 billion state budget to be debated today on Beacon Hill contains no broad-based tax increases and makes substantive public-transportation reforms sought by the business community.

State_House_and_One_BeaconEmployers are disappointed, however, that the spending blueprint reverses an agreement reached between business and the Legislature as part of the 2008 “combined reporting" tax policy change. Repeal of the so-called FAS 109 deduction, which had been postponed as the state revenues declined during the recession, could harm capital-intensive national and global companies.

“AIM continues to review the final budget for Fiscal Year 2016, but the budget conference committee has generally maintained the kind of spending discipline that employers support,” said John Regan, Executive Vice President of Government Affairs.

“The proposal lays the groundwork for real changes at the MBTA, changes intended to prevent the widespread service breakdowns we saw this past winter.”

The committee budget increases spending by 3.5 percent, less than the predicted 4.8 percent consensus on revenue growth. Unrestricted local aid would rise by $34 million and local education aid by $111.2 million.

The MBTA reforms provide Governor Charlie Baker with many of the tools he is seeking to overhaul the transit agency. The budget would suspend for three years the onerous privatization vetting of the Pacheco Law, give the secretary of transportation the authority to hire an MBTA general manager, increase the size of the state Transportation Board and create a temporary fiscal and management control board for the T.

The budget contains other good news for employers as well:

  • Requires state executive offices and agencies to develop measurable, outcome-based performance goals and metrics.
  • Forms a special commission to improve state agency information-sharing capabilities to facilitate new business registration.
  • Authorizes the commissioner or revenue to offer an amnesty program for tax penalties in 2016.
  • Provides $2 million to the Workforce Competitiveness Trust Fund, which will train new workers in manufacturing, hospitality and other high-need industries.

Beacon Hill observers say the FAS 109 deduction is being repealed to pay for an increase in the earned income tax credit for low-income workers. The reversal sends a troubling signal to employers that previous agreements on major tax policy may be changed on a whim.

“It certainly does not help the commonwealth’s reputation for consistency on tax matters,” Regan said.

AIM and other business groups will recommend today that the governor veto the FAS 109 repeal.

The 2008 Combined Reporting tax law brought income from companies' operations in other states into a unitary or "combined" Massachusetts return. The FAS 109 deduction was adopted to avoid penalizing companies after the fact for making capital investments. FAS 109 is an accounting standard that requires that financial statements reflect the tax consequences of all book/tax differences.

Fiscal Year 2016 began on July 1. If the Legislature approves the blueprint today, it goes to Governor Baker for his review. The Governor has 10 days to review the budget and take action - approve or veto the entire budget, veto or reduce specific line items, veto outside sections or submit changes as an amendment to the budget for further consideration by the Legislature.

The Legislature can override the governor’s vetoes with a two-thirds vote in each branch. The House must vote first to override any vetoes before they may be considered by the Senate.  

 

Topics: Massachusetts state budget, Budget, Taxes, Transportation

Budget Proposal Targets 'Unsustainable' Spending Growth

Posted by Brad MacDougall on Mar 4, 2015 3:40:55 PM

What does the proposed state budget filed today by Governor Charlie Baker mean for Massachusetts employers?

Baker2014The bottom line is pretty simple – state spending is growing at twice the rate of tax revenue and that trend is unsustainable. The new administration must therefore make difficult choices to close a projected $1.5 billion budget shortfall for next fiscal year just weeks after addressing an unexpected $750 million gap in the current budget.

It's something that that the CEO of almost every member company of Associated Industries of Massachusetts has had to do at one time or another.

Secretary of Administration and Finance Kristen Lepore said the administration will not raise taxes or fees, nor tap the state’s rainy day fund, meant for fiscal emergencies. At the same time, the allocation of scarce budget resources provides an insight into the new governor’s long-term priorities, from having state employees pay an increased share of their health insurance premiums to increased aid to cities and towns.

“For two consecutive years, our spending growth has outpaced our revenue growth. After over $1 billion in budgetary reductions last year, state spending still grew at 7.8% more than the year before, while tax revenue only grew at 4%. This is simply an unsustainable path for Massachusetts - we must live within our means,” the governor said in his budget message.

“This proposal keeps spending growth around 3%, and allows us to begin to address long-term structural changes and reduce our reliance on one-time revenue. We protect our rainy day fund, because in a largely healthy economy it is clear our issues are based on a need to prioritize spending and make state government more efficient. We also avoid layoffs through an early retirement package that will reduce the size and cost of the state workforce.”

Fiscal discipline and predictability are welcome themes for Massachusetts employers who, according to the Massachusetts Taxpayers Foundation, pay approximately $150 million more in taxes each year than they did a decade ago. CEOs expect the government to conduct its financial affairs in the same responsible manner as the corner grocery store, the young biotechnology company or millions of citizens managing the household budget.

“The 4,500 member companies of Associated Industries of Massachusetts typically pay more attention to the budget as a proxy for the ability of state government to manage its affairs, rather than to individual line items,” said John Regan, Executive Vice President of Government Affairs at AIM.

“The governor’s proposed budget takes constructive steps toward ensuring that the commonwealth lives within its means.”

The projected shortfall for Fiscal Year 2016 is driven by two factors, according to the Taxpayers Foundation.

The first is a significant increase in costs for items and programs considered nondiscretionary — such as Medicaid, the state-federal health program for poor and disabled people, and pensions — just to keep the same level of service next year. The second is the state’s heavy reliance on one-time sources of money — pots of cash that are tough or impossible to tap again — this fiscal year.

Those sources of money total about $1 billion and include tax settlements with corporations, a temporary diversion of tax revenue intended for the state’s rainy day fund, and casino licensing fees.

Here are the key elements of the Baker budget proposal:

  • A $34 million increase, or 3.6%, in unrestricted local aid to $980 million
  • A $105.3 million increase in Chapter 70 funding, which increases funding for all 321 school districts
  • A phase in of the Earned Income Tax Credit to 30% of the federal limit while phasing out the Film Tax Credit
  • Funding local aid by 75% of revenue growth, a 3.6% increase
  • Increasing transportation spending by 20%, including $187 million, or a 53% increase, in direct aid to the MBTA
  • An early retirement incentive program to responsibly reduce the state’s administrative spending 

Topics: Budget, Taxes, Charlie Baker

AIM Proposes Improvements to Tax Rules

Posted by Brad MacDougall on Dec 19, 2014 10:59:43 AM

Editor’s Note: The following article is written by Michael Jacobs and Robert Weyman, both attorneys with AIM-member law firm Reed Smith LLP. Jacobs and Weyman are members of Reed Smith’s State Tax Group and focus their practices on corporate state tax controversy and planning matters.

Finance.pen.smallNew rules that change the way numerous multi-state businesses will determine their Massachusetts corporate taxes go into effect for tax returns filed in 2015.

The rules require that many sales, for example sales of services, be sourced to a taxpayer’s “market.” Under the old rules, these sales were sourced to the location where the taxpayer incurred its costs in making the sale.  Combined with a “throwout” rule, this new tax regime can dramatically change the formula a multi-state business uses to determine the portion of its income Massachusetts can subject to tax.

Over the past year, the Massachusetts Department of Revenue (DOR) has been drafting revised regulations that interpret the new rules and guide taxpayers attempting to implement them. DOR issued a first draft in March and then a revised draft in October.  The draft regulations now include more than seventy pages of complex rules that taxpayers will have to apply in short order. 

At each stage of the drafting process AIM has solicited feedback from its Tax Committee and the AIM membership at-large. The association pushed DOR to consider and incorporate AIM member concerns into the revised regulations.  AIM has also presented member concerns to the Department of Revenue in written comments.

AIM’s most recent written comments, submitted on December 4, range from broad tax policy suggestions to technical critiques of specific regulatory provisions.  Three overarching themes run throughout the comments.  

Fairness

AIM has fought for fair application of the new taxing rules, challenging the DOR to craft rules that put taxpayers and the department on equal footing.  For example, a proposed provision would prevent some taxpayers from filing amended returns that adjust how they determine their “market,” while permitting the Department to audit the taxpayer and adjust its return.  AIM has strongly objected to the inequity of this provision.   

Certainty

AIM is rightly concerned that regulations that provide multiple potential sourcing options governed by subjective tiered rules will result in audit disputes and litigation.  AIM urged the commonwealth to create a tax system that results in certainty for taxpayers, so that taxpayers are not hit with surprise tax assessments years down the road. 

Minimizing Regulatory Burdens

AIM objected to the voluminous and complex nature of the regulations, and the regulatory compliance burden they will create.  AIM requested that the DOR incorporate clear and easily applied “safe harbors” into the regulations.  For example, AIM has questioned the necessity of certain rules that could require taxpayers to conduct granular analysis of where its services are delivered to specific customers.  AIM rightly points out that such provisions would result in a tax regime that is more complex and difficult to administer than almost any other state in the country.

The DOR is expected to issue its final regulations by the end of the year.  While the Department has already implemented some of AIM’s comments in its December revised draft, it is hoped that state officials take the opportunity to review AIM’s detailed critiques and to implement suggested changes that would help to ensure that the final regulations are fair, give taxpayers certainty, and minimize regulatory burdens to the extent possible.

For a copy of AIM’s comments, contact Brad MacDougall, Vice President of Government Affairs, bmacdougall@aimnet.org.

 

Topics: Regulation, Taxes

Blueprint for the Next Century | Regulation

Posted by Christopher Geehern on Nov 19, 2014 9:16:00 AM

(Editor's note - AIM last week released the Blueprint for the Next Century, a long-term plan for economic growth and prosperity in Massachusetts. The AIM blog will this week publish one summary each day of the four recommendations contained in the Blueprint. We invite your responses in the Comments section.)

Establish a world-class state regulatory system that ensures the health and welfare of society in a manner that meets the highest standards for efficiency, predictability, transparency and responsiveness.

RegulationWhere We Stand

Massachusetts employers acknowledge the need for effective and well-managed regulation that ensures the health and welfare of society without weakening the financial underpinnings of the job market. But the employer community believes that Massachusetts regulations and the regulators who enforce them often stray from the primary objective of protecting society and into a mindset of “punishing” businesses.

Where We Can Improve

  1. The governor should appoint an independent ombudsperson to review comments, suggestions and complaints from employers about ineffective state regulations and/or the manner in which those regulations are enforced. The ombudsperson would have the authority to determine which regulations and/or enforcement issues represent real impediments to growth and recommend changes to the Legislature or the executive branch.

    Associated Industries of Massachusetts, as the statewide business association, will establish a phone/internet hotline, or perhaps a mobile app, through which employers might report regulations they believe are not efficiently achieving their objectives. AIM would pass these communications to the ombudsperson.

  2. Encourage regulators and employers to adopt “smart partnerships” to ensure that government-business interactions solve problems instead of propping up bureaucracies.

    State Senator Daniel Wolf from the Cape and Islands, founder of Cape Air in Hyannis, recalls an example of creative problem solving that took place many years before he entered public service.  The Federal Aviation Administration required (and requires) Cape Air to scrupulously wash all aircraft. The airline did so, but then faced fines from the Massachusetts Department of Environmental Protection because there was some runoff into drains on the airport tarmac. After good-faith negotiations, the DEP and Cape Air reached an agreement: Cape Air paid for a state-of-the-art clean wash bay for Barnstable Municipal Airport, and DEP significantly reduced the fine. This was a win for the company and a win for the citizens of the commonwealth. And, it represents a great example of a “smarter partnership.”

    The governor should engage willing employers who are global leaders in productivity and process improvement to streamline the operation of state government agencies. General Electric, an AIM member, provided just such a service for the New York State Highway Department at the request of Governor Andrew Cuomo. GE Capital used its expertise in lean process to help the Highway Department reduce the processing time for curb-cut requests from 70 days to three days.

    Empower front-line regulators with the authority to approve creative solutions such as the one developed with Cape Air.

  3. Initiate a comprehensive review to identify regulations that are outdated, redundant, ineffective, inefficient or unnecessary.

  4. Eliminate current state regulations that exceed federal standards.

  5. Adopt an immediate moratorium on any state law or regulation that exceeds or duplicates a federal law or regulation.

  6. Enact broad regulatory reform at the Massachusetts Department of Revenue:

    Ensure that taxpayer returns remain confidentially held by the DOR.

    Ban DOR from lobbying the Legislature and other elected officials.

    Reform the DOR’s audit practices to ensure timely resolution of disputes and increase the use the mediation.

    Reform the Appellate Tax Board to ensure fair, equitable and timely resolution of tax disputes.

    Eliminate the practice and use of contingent auditors.

    Improve the DOR’s electronic filing system, which is one of the most challenging and complicated in the country.

  7. The state should work with cities and towns to establish a set of efficiency and fairness standards for local issues such as inspections, fees and permitting.

    Associated Industries of Massachusetts, perhaps in conjunction with the Massachusetts Municipal Association, will develop an annual rating of the business climate in cities and towns and recognize the top 10 municipalities for business.

    The commonwealth and its municipalities should move toward regionalization of functions such as inspections and permitting to improve efficiency.

 

 

Topics: Regulation, Taxes, Blueprint for the Next Century

Governor Signs Jobs Bill; Renews Bid for Non-Compete Restrictions

Posted by John Regan on Aug 13, 2014 3:42:00 PM

Governor Deval Patrick today signed an economic development bill supported by employers, but also filed a last-ditch bill to add restrictions on non-compete agreements.

Patrick2014The governor’s bill, which would prohibit employers from using non-compete agreements with hourly employees and limit the length of those agreements to six months, has virtually no chance of passage this year. Beacon Hill lawmakers previously declined to include any non-compete restrictions in the original economic development measure and are unlikely to do so now that informal legislative sessions mean that a single legislator may stop passage of a bill.

The economic development law signed by the governor would expand the research-and-development tax credit and create multiple initiatives to accelerate job growth. Governor Patrick vetoed sections creating an angel investor tax credit and a "live theater tax credit" designed to encourage more productions of pre-Broadway and pre-Off Broadway theater in Massachusetts

“We commend Governor Patrick for signing the economic development bill, but remain puzzled with the effort to push non-compete restrictions opposed by large segments of the business community. Legal protection for intellectual property is a priority for small and large firms alike, and the governor’s proposal on non-competes cuts right at the heart of what drives our national and global competitiveness,” said Brad MacDougall, Vice President of Government Affairs at AIM.

“The Legislature had good reason to leave non-compete restrictions out of the economic development bill and they have good reason not to pass this new bill.”

The Legislature’s decision to maintain the current non-compete law came after hundreds of AIM member employers contacted members of the Legislature to underscore the importance of protecting the innovations that drive the Massachusetts economy. AIM members from every sector of the economy, from technology to manufacturing, expressed overwhelming support for keeping the law as is.

The Patrick administration and a coalition of venture capitalists have sought for more than a year to ban non-competes altogether, arguing that they inhibit the growth of new companies in the innovation economy.

The research-and-development tax provision in the economic development bill creates an Alternative Simplified Credit (ASC) as an alternative to the traditional tax credit. ASC allows employers the option to claim a credit equal to 10 percent of any research expenses that exceed a base amount calculated over a period of three years.

Current law allows credits only for incremental R&D spending over a set base period in the 1980s.

AIM believes the changes are necessary to reverse a troubling 19.3 percent decline in R&D spending among Massachusetts employers between 2007 and 2011. The vast majority of research and development in Massachusetts takes place not in urban innovation districts, but in advanced manufacturing, medical device, defense and biopharma companies salted throughout the commonwealth.

“The updated R&D credit represents a substantive step toward stimulating the kind of innovation that drives economic growth in Massachusetts,” MacDougall said.

 

Who Will Win the November Election? Attend the September 19 AIM Executive Forum with Pollster David Paleologos

Topics: Economic Development, Non-Compete Agreements, Taxes

AIM Urges Governor to Sign Economic Development Bill

Posted by Brad MacDougall on Aug 6, 2014 9:12:33 AM

Associated Industries of Massachusetts urged Governor Deval Patrick yesterday to sign an economic development bill that would expand the research-and-development tax credit and create multiple initiatives to accelerate job growth.

Molecular_Structures.SmallIn a letter to the governor, AIM said that An Act Promoting Economic Growth across the Commonwealth contains provisions “that will have a positive impact on the Massachusetts business climate.”

The research-and-development tax provision creates an Alternative Simplified Credit (ASC) as an alternative to the traditional tax credit. ASC allows employers the option to claim a credit equal to 10 percent of any research expenses that exceed a base amount calculated over a period of three years.

Current law allows credits only for incremental R&D spending over a set base period in the 1980s.

AIM believes the changes are necessary to reverse a troubling 19.3 percent decline in R&D spending among Massachusetts employers between 2007 and 2011. The vast majority of research and development in Massachusetts takes place not in urban innovation districts, but in advanced manufacturing, defense and biopharma companies salted throughout the commonwealth

“And we know that R&D credits work. Massachusetts enacted a set of research and development tax incentives in 1991 that were among the most advantageous in the nation. Over the next five years, R&D spending in the commonwealth increased by more than 50 percent,” said John Regan, Executive Vice President of Government Affairs for AIM.

Other key provisions of the economic development bill include:

  • Sales Tax Exemption - Clarifies the eligibility definition in the state’s life sciences research-and- development sales-tax exemption law to include limited partnerships.
  • Financial Services Advisory Council – Creates a council to provide the governor with ongoing feedback and recommendations on the ways in which state policy impacts the banking and financial-services sectors.
  • Manufacturing Studies – Provides for a comprehensive study of the manufacturing industry by the Massachusetts Manufacturing Extension Partnership (MMEP) and a separate study of the manufacturing supply chain in Massachusetts.
  • Massachusetts Computing Attainment Network Program (MassCan) Promotes and expands computer science education in public schools. MassCan addresses the commonwealth’s need to train the next generation of computer science experts for the jobs of the future.
  • One-Stop Shop Business Portal - Enhances the manner in which Massachusetts government provides resources to business by directing the chief information officer of the Information Technology Division to create an online portal to serve as a one-stop shop for businesses seeking information to start or grow a business in the commonwealth.
  • Wireless Innovation – Makes Massachusetts the fortieth state in the last 30 years to embrace a national framework for the mobile industry. The framework recognizes the global environment in which businesses operate and encourages a policy environment that promotes innovation for the customer.
  • Proof of Concept – Creates the Innovation Commercialization Seed Fundto make initial investments with researchers and students at the University of Massachusetts and other research universities who have invented or developed concepts, goods or services that have commercial potential.

The Legislature passed the economic development bill in the early hours of August 1. Governor Patrick has the option to sign or veto the entire bill, veto individual sections of the bill, or send sections back to the Legislature with proposed amendments.

Topics: Research, Economic Development, Taxes

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