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Here is Where We Stand on Transportation

Posted by Brooke Thomson on Jan 31, 2020 7:27:03 AM

Editor’s note – The following excerpts are from a letter than AIM sent on Wednesday to House Speaker Robert DeLeo outlining the association’s views on transportation. Brooke Thomson is Executive Vice President of Government Affairs at AIM, which represents 3,500 companies in all industries located throughout Massachusetts.

bostonatnightAIM supports policies and responsible new investment to reduce congestion, grow capacity to deliver capital projects, lower carbon emissions in the transportation sector and ensure accountability and transparency in transportation investment spending. Additionally, we urge that any solutions adopted be equitable to people of all income levels and all regions of the Commonwealth.

That said, we at AIM understand the complexity of the challenge you are facing. Not only is it difficult to predict how much and what type of investments need to be made, but also solving the transportation problem encompasses several state agencies and many policy initiatives will impact every segment of our population. These areas include the MBTA and Regional Transit Authorities (RTAs), MassDOT, Transportation Network Companies (TNCs) and our state’s compliance with the 2008 Global Warming Solutions Act as well as the newly announced climate initiatives related to attaining zero net energy use by 2050.

We at AIM urge you to consider the following:

  1. AIM supports Governor Charlie Baker’s $18 billion transportation bond bill now pending in the state Legislature. AIM believes strongly that the first step in any reform must be to remove current structural impediments that prevent the Department of Transportation and the MBTA from spending the money that the taxpayers have already given them. Procurement and policy reform to the transportation system must occur before discussions about new revenue.

  2. To that end, AIM believes it is premature to discuss a possible gasoline tax at this time. MassDOT has reported they are still not able to spend approximately $600 million they currently have available. Throwing more money at the issue without the capacity to spend it will not make our transportation system better and will add further costs to our families and businesses in the communities they operate. Furthermore, a gasoline tax is regressive and will fall hardest on low-income individuals and those outside Greater Boston who have no other options but to drive.

  3. Likewise, we are concerned about proposals to increase TNC fees. Even if increased TNC revenues are dedicated to public transportation, such increases are punitive and really do not address the major issues surrounding transportation in the state. In some areas, rideshare trips are vital new innovations that support access to medical appointments, pharmacies, or trips to the grocery store, and much of the TNC usage is in communities throughout the Commonwealth outside the greater Boston area where at times when the MBTA or public transportation is simply not available or convenient.

    Furthermore, since recent studies by MassDOT and independent consulting firm Fehr & Peers both show that ridesharing accounts for less than 5 percent of total vehicle miles traveled in Greater Boston. Therefore, increasing fees on TNC usage will not contribute to alleviating congestion in any way. Finally, as with an increase in the gasoline tax, increased TNC fees will disproportionately impact people in areas where congestion is simply not a problem, mainly outside of Boston.

  4. We are also concerned about various corporate tax proposals that would have negative impacts on our state’s economic competitiveness and are not directly tied to transportation. Rather, various corporate tax proposals seek to harm businesses directly rather than engaging in a meaningful and purposeful conversation that can have a direct impact on the serious transportation challenges we face.

    AIM would argue that corporate tax proposals such as the accelerated sales tax, elimination of single sales factor, the 80 percent surtax on individuals and business owners are among a series of proposed corporate tax proposals that are not only negative to our Massachusetts economy but detrimental to the very goals of addressing our transportation and climate issues we all share.

  5. Additionally, AIM believes that any solution to our Commonwealth’s transportation challenges must reduce greenhouse gases in the transportation sector. This is necessary to not only to comply with state law passed by the Legislature and signed by the Governor in 2008, but also to address the urgent need to slow climate change. The transportation sector is currently the largest emitter of greenhouse gases in Massachusetts and emissions are rising as other sectors decline.

    Because of this connection between transportation revenues, investments and greenhouse gas reductions, AIM supports the state’s participation in the Transportation and Climate Initiative (TCI). TCI is a regional collaboration of 12 Northeast and Mid-Atlantic states and the District of Columbia that seeks to improve transportation, develop the clean-energy economy and reduce carbon emissions from the transportation sector. It will do this by establishing a multi-state cap on carbon emissions and auctioning allocations through a market-based mechanism.

    Money raised through the auction process will be given to each state based on their contribution and used to fund programs that reduce greenhouse gases – mostly through investments in public transportation and a transition to electric and other alternative vehicles. It is important to note that TCI is preferable to an increase in the gasoline tax for several reasons. TCI is regional and will reduce greenhouse gases by raising revenue for statewide public transportation investments (helping congestion) and encourage the use of alternative vehicles by offering rebates or other incentives. It will also decrease over time, as Massachusetts and the region meet our goals on reducing carbon emissions from transportation.
     
  6. AIM would urge that like other critical programs and state services that are delivered through state agencies and tax dollars, that the Legislature strongly consider creating an umbrella trust fund where state and federal transportation related taxes, fees and revenues are annually collected. Using an umbrella trust fund will allow the Legislature and others to understand the effectiveness of our transportation dollars by accurately knowing revenue sources and amounts. Finally, it is worth noting that as the transportation debate continues, AIM will be reaching out to our members concerning their views on congestion pricing and fair tolling as additional means of addressing transportation challenges. Once we have that feedback collected, we will be happy to share results with you.

Improving the complex Massachusetts transportation system will require timing, coordination, patience, prudence, collaboration and compromise, in order to reach a solution that lays the foundation for long-term economic growth. We thank you for allowing us to submit these comments and look forward to working with you, your office and your members on this important issue.

To join our mailing list for tax or transportation issues please contact Brooke Thomson’ at bthomson@aimnet.org.

Not an AIM member? Contact Bob Paine at rpaine@aimnet.org.  

Topics: Taxes, Transportation, TCI

House Makes Wise Choice to Postpone Transportation Debate

Posted by Robert Rio on Nov 18, 2019 8:00:00 AM

The Massachusetts House of Representatives has postponed until January its debate on how to overhaul the commonwealth’s transportation system.

trafficsmallHouse Speaker Robert DeLeo said Thursday that lawmakers initially planned to take up the transportation debate next week, but wanted more time to digest an enormously complex and contentious issue.

"…We decided that it's better that we try to get this right than to try to comply with, I guess you could say, a somewhat arbitrary deadline," DeLeo told State House News Service.

The Legislature is set to recess on Nov. 20 and resume formal sessions in January. While the House and Senate will continue to meet in informal sessions through December, anything that requires a roll call vote must wait.

Associated Industries of Massachusetts, which supports a reasoned, long-term approach built around Governor Charlie Baker’s $18 billion transportation bond bill, commended the House for its decision to push back the debate.

“We appreciate that the Speaker and his members are being thoughtful about this complex issue of transportation reform. Taking additional time to weigh all options is the best path forward for the Commonwealth,” said Brooke M. Thomson, Executive Vice President of Government Affairs at AIM.

“AIM will be working with House members as they continue to look at this issue.”

AIM and ist 3,500 member employers believe the first step to transportation reform must be to remove the structural impediments that prevent the Department of Transportation and the MBTA from spending the money that the taxpayers have already given them. Analysis of MBTA spending patterns reveals that budgeted capital expenditures have risen from less than $500 million in 2013 to $851 million in 2018, but the T still fell short of the $1.6 billion that was available in 2019.

AIM respectfully disagrees with those who support raising new revenue immediately through a gasoline or other tax for the transportation system. Raining money on a transportation system without updating outmoded procurement regulations and rules governing public-private partnerships is like putting brand-new rail cars on corroded 19th century tracks.

AIM is open to reducing transportation emissions by supporting the Transportation Climate Initiative (TCI), a regional collaboration of 12 Northeast and Mid-Atlantic states and the District of Columbia that seeks to improve transportation, develop the clean-energy economy and reduce carbon emissions from the transportation sector.

Topics: Massachusetts House of Representatives, Taxes, Transportation

The Top 10 Massachusetts Business Stories of 2017

Posted by Christopher Geehern on Dec 27, 2017 11:13:10 AM

A generational reset of the nation’s tax code, a controversial employer assessment to fund health insurance for poor people, and upheaval surrounding workplace sexual misconduct head the list of the top business stories in Massachusetts for 2017.

Tax.jpgIt was a year in which forces originating outside the borders of the commonwealth heavily influenced the fortunes of employers and political leaders here. Issues ranging from the political maelstrom in Washington, DC, and a strengthening economy to the #metoo movement and Amazon’s search for a second corporate headquarters all filtered into a complex mix that formed the Massachusetts business climate.

The tax law passed by Congress and signed by President Trump just before Christmas reduced the corporate excise tax from 35 to 21 percent and also dropped rates for pass-through businesses that pay at the personal level. Still, Bay State employers worried about adding $1.5 trillion to the federal deficit and new limitations on deductions for state and local taxes that will primarily affect high-cost states like Massachusetts.

Taxes in Massachusetts could be going in the opposite direction next year as advocates spent 2017 pushing a constitutional amendment that would increase the tax from 5 to 9 percent on income more than $1 million. AIM President and Chief Executive Officer Richard C. Lord joined four other prominent business leaders during October in filing a lawsuit challenging the validity of the proposed amendment.

“The proposal would lead to a radical decentralization of fiscal policy away from the Legislature and set the stage for future initiatives from a range of interest groups proposing constitutional amendments segregating funds for their preferred causes, or raising tax rates on some groups and lowering taxes on others," Lord said.

Here are the top 10 Massachusetts business stories for 2017:

  1. President Donald Trump signs a tax bill that reduces levies on corporations and pass-through businesses but increases the federal debt and trims popular deductions.

    In addition to lowering the corporate tax to 21 percent, the law will cut the burden on owners, partners and shareholders of S-corporations, LLCs and partnerships through a 20 percent deduction. On the personal side, it lowers many individual income tax rates, doubles the standard deduction, eliminates personal exemptions, narrows the alternative minimum tax, lowers the cap on mortgage interest deductions and caps deductions for state and local taxes at $10,000.

  2. Massachusetts lawmakers impose a $200 million assessment on employers to close a funding gap in the MassHealth insurance program for low-income people.

    The Baker Administration initially proposed a $2,000-per-worker fee for businesses that did not cover at least 80 percent of their workers and share at least 60 percent of the premium cost. The governor and business community eventually negotiated a compromise that placed the heaviest assessments on companies with workers that use Mass Health insurance while outlining structural changes to the Mass Health program. The Legislature approved the assessment without the structural changes, but included rate relief on unemployment insurance premiums.

  3. Employers grapple with the implications of the #metoo movement highlighting sexual harassment and sexual assault in workplaces ranging from film studios to television networks to restaurants and hotels.

    Employers scrambled to review their policies on sexual harassment – and their enforcement of those policies - as millions of women around the world shared stories of sexual harassment and abuse in the wake of accusations against movie mogul Harvey Weinstein. The tidal wave washed over high-profile figures from news hosts Charlie Rose and Matt Lauer to celebrity chefs like Mario Batali to classical music conductors like former Boston Symphony Orchestra Maestro James Levine. AIM urged employers to take seriously all employee claims of sexual misconduct on the job and to investigate those claims scrupulously.

  4. Twenty-six Massachusetts communities and regions submit bids to host the $5 billion “second headquarters” development of e-commerce behemoth Amazon.

    The project offers the promise of some 50,000 jobs in the information technology space that is a strength of the Massachusetts economy. Boston submitted a 218-page proposal to site the campus at the current Suffolk Downs property, while New Hampshire gratuitously threw shade on the city as a traffic choked, overly expensive nightmare. Worcester upped the ante by offering $500 million worth of incentives. Amazon said it received 238 proposals in all from throughout North America. The company is expected to narrow that field in 2018.

  5. Activists begin the process of placing on the 2018 statewide ballot the three potential questions that would represent an unprecedented public-policy crisis for Massachusetts employers.

    The proposals include the income surtax constitutional amendment, a mandate that employers provide 16 weeks of paid family leave and 26 weeks of paid medical leave for employees, and an increase in the state the state minimum wage from $11 per hour to $15 per hour.

  6. Employers and advocates hammer out compromise legislation to extend employment protection to pregnant workers in Massachusetts.

    The Pregnant Workers Fairness Act requires employers to make reasonable workplace accommodations for pregnant employees — more frequent or longer breaks, temporary transfer to a less strenuous or hazardous position, or seating for those whose jobs require extended standing. AIM opposed early versions of the bill during the 2015-2016 legislative session because of concern that the legislation provided an applicant or employee with unlimited power to reject multiple and reasonable offers of accommodation by an employer. The compromise bill addressed that concern and others.

  7. A strong employment market and long-term demographic shifts exacerbate the challenge of finding skilled employees, but wage growth remains muted.

    The good news is that the Massachusetts economy continued in full-employment mode during 2017 and the jobless rate dropped to 3.6 percent in November. But experts warn that those numbers threaten to derail the ability of employers to find the workers they need to grow at a time when large number of baby boomers prepare to leave the work force. “The concern is that Massachusetts could become a victim of its own success,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors. Still, wage growth is expected to remain slow during 2018 – the AIM Human Resource Practices Survey published in December shows that employers plan to provide average wage increases of 2.66 percent during 2018, down from 2.75 percent this year.

  8. Employer confidence reaches a 17-year high and remains strong throughout 2017.

    Massachusetts employers remained optimistic as the national economy surged and manufacturers, in particular, grew bullish about their own business prospects. The AIM Business Confidence Index began 2017 at a healthy 61.4 and moved in a narrow range before hitting a high of 62.7 in October. The AIM Index is calculated on a 100-point scale, with 50 as neutral - a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009. The Index has remained above 50 since October 2013.

  9. The Baker Administration issues new regulations that set specific limits on sources of greenhouse gasses in a move that could increase already high employer electric rates by as much as 2 percent.

    The new rules aim to reduce the state’s carbon emissions 25 percent below 1990 levels by 2020, as required by state law. AIM was extremely disappointed with the regulations. The electric-rate increases generated by the proposed rules, when combined with other pending cost increases, could raise the electric bills of Massachusetts employers some 10 percent in the next year alone. AIM maintains that the regulations are ultimately unnecessary - the administration could have chosen to work with the legislature to change the Global Warming Solutions Act to allow for alternative ways for the electricity sector to meet these obligations.

  10. AIM member CVS Health proposes to acquire insurance company Aetna for $69 billion.

    The merger of one of the nation’s largest retail pharmacy companies with one of its dominant insurers under the shadow of a potential incursion by Amazon underscores the breathtaking changes sweeping through the American health-care and economic systems. With their merged data about people’s health and vast reach, the two companies assert that they can make real change in a health-care landscape that nearly everyone agrees is too convoluted, inefficient and expensive.

 

Topics: Massachusetts Legislature, Massachusetts economy, Taxes

Paul Ryan Visits New Balance; Says Tax Reform Coming This Year

Posted by Rick Lord on Jul 28, 2017 8:16:29 AM

For a man who carries the weight of the nation’s economy, budget and health-care systems on his back, US House Speaker Paul Ryan projects the approachable air of a neighbor who shows up at your door to lend you his hedge clippers.

Paul Ryan.jpgI joined other business leaders last Thursday afternoon meeting with Speaker Ryan during an event hosted by New Balance in Lawrence. Unfailingly gracious and remarkably relaxed, the speaker toured the only major foot-ware company that manufactures product in the United States to talk about the potential of tax reform to accelerate economic growth.

The rancorous Washington political debate followed the speaker to Massachusetts as labor unions and other protesters accused Ryan of being a “traitor” and of endangering people’s health with his political agenda. But inside the plant, humming with opportunity and economic activity, people of differing political stripes, Republicans and Democrats alike, left behind the public noise and engaged in a thoughtful discussion about how to encourage companies like New Balance to put people to work.

In other words, it was an event that more closely approximated the bipartisan, collaborative tenor of Massachusetts politics than anything that usually happens on the banks of the Potomac. Not everyone agreed on what tax reform should look like (AIM members are themselves far from unanimous about their approach to taxes) but everyone agreed that the system needs an overhaul.

The final contours of the Republican tax proposal are still being hammered out among the House, Senate and White House negotiators. But most observers expect the plan to reduce taxes on corporations and small businesses from 35 percent to somewhere between 20 and 25 percent, consolidate tax brackets, reduce deductions and simplify the tax-filing process.

Ryan said that Republicans remain far more united on tax reform than on repealing health-care reform.

“We’re going to get this done in 2017,” he told reporters.

“Obviously, we’ve seen in the Senate there are a difference of opinions on how to do health care reform. We are so much more unified on tax reform, on what it looks like, and how to do it, and the need to do it.”

New Balance, a longtime AIM member, employs more than 1,700 Massachusetts residents who use intelligence, lean manufacturing and efficiency to make running shoes in a state where manufacturing  is always a challenge. The company also developed the $500 million Boston Landing project in Brighton, a 1.45 million-square-foot campus that includes a new company headquarters, state-of-the-art athletic complex, hotel, restaurants, retail space and parking.

My comments to Speaker Ryan noted that New Balance and other manufacturing companies struggle to grow and provide jobs because the cost of doing business remains higher in the United States than in many countries abroad. Those costs are particularly onerous here in Massachusetts, where employers pay more for energy, health care and other necessities than anywhere else in the country.

I told the speaker that AIM is working with Governor Charlie Baker and the Legislature to address the health-care and energy cost issues, but that both are complex, structural problems that demand long-term solutions. Federal tax reform, on the other hand, offers a unique opportunity to improve the business climate in a relatively rapid time frame.

It will also be important to help small businesses during the tax-reform process. Both President Trump and the US House appear ready to lower taxes on subchapter S corporations and other pass-through entities, just as those companies face the prospect of seeing their state tax burden increased under an ill-conceived “millionaires tax” on next year’s ballot.

We all understand the potential challenges of tax reductions on a federal deficit that reached $523.1 billion during the first nine months of the current budget year. We all understand the need to debate spending priorities, especially in a state like Massachusetts where economically important industries such as health care, defense and higher education depend upon federal funding.

But the fact remains that employers like New Balance pay federal taxes that are almost a third higher than competitors in other countries.

“Today, places like this, this is more the exception than the rule,” Speaker Ryan told the media at New Balance.

“That’s our problem. Companies are not flocking to the United States, companies are fleeing this country and taking their good jobs with them. They’re not storing up their profits and their capital here, they’re keeping them offshore.”

Topics: U.S. House of Representatives, Taxes

Income Tax Surcharge Would Harm Business

Posted by John Regan on Jun 14, 2017 2:07:38 PM

We call ourselves a commonwealth.

From the preamble of the Massachusetts Constitution:

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

Now the Legislature is considering a petition to amend the language of Article XLIV in a manner that would increase by 80 percent the taxes paid on incomes in excess of $1 million, adjusted annually by the same method used for federal income tax brackets to reflect any cost-of-living increases. According to the ballot question language, every dollar of income more than $1 million would face a tax of 9.1 percent.

Those earning $1 million of income per year currently pay 95 percent more tax than those making $50,000 annually - an income of $50,000 generates a tax obligation of $2,550, while the $1 million dollar income generates $51,000 of income tax (all things being equal).

Some additional facts 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 will generate between $1.6 billion to $2.2 billion, with $1.9 billion identified as the median.
  • The $1.9 billion tax increase will 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 will be married couples filing jointly, and 11 percent will be individual filers with earnings of more than $1 million.

Advocates for this constitutional amendment focus on the revenue derived therefrom rather than the uneven or inequitable method of its generation. The amendment requires that generated revenues 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.”

However, 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…” For a petition to be constitutionally valid, the Legislature must retain the ability to use tax revenues for any public purpose the Legislature deems appropriate.

It follows that a “yes” vote necessarily diminishes the authority and responsibility invested in the members of the Massachusetts General Court. Our Constitution gives members of the House and Senate the sole authority to authorize how tax revenues are appropriated. Any assertion by the petition's proponents about limiting how the money is used is folly and prohibited by the Constitution. By passing the amendment, legislators abdicate their constitutionally protected authority.

The 4,000 member employers of Associated Industries of Massachusetts therefore urge a “No” vote on this measure.

Before we approve a policy that raises so much from so few we must ask – does this imbalance make the commonwealth a better, or a worse place?

We would suggest that it makes Massachusetts an unfair place.

Topics: Taxes, Income Surtax

The Constitutional Amendment Tax Trap - Myths and Facts, Part 4

Posted by John Regan on Jun 13, 2017 9:08:03 AM

Editor's note - Beacon HIll lawmakers will vote on Wednesday whether to place on the 2018 statewide ballot a proposed constitutional amendement that would impose a four percentage-point surtax (an 80 percent increase) on incomes of more than $1 million. AIM opposes the Constitutional Amendment Tax Trap and will look at the myths and facts surrounding the issue each day through Wednesday.

Myth: High income earners in Massachusetts are not paying their “fair share” to support the cost of state government programs and investments.

Fact: The existing Massachusetts income tax is highly progressive, with the highest income earners paying the highest share of taxes and the highest effective tax rates.

According to data from the Massachusetts Department of Revenue, the top 20 percent of earners already pay 73 percent of all the income taxes paid to the state. (The top 1 percent of earners alone account for 28 percent of all income taxes paid.) Furthermore, the top 20 percent of earners had an average effective tax rate of 4.7 percent, nearly double the average effective rates paid by the lowest 40 percent of earners.

Share.jpg

 

Myth: The proposal will help to narrow wealth and income gaps and enhance our status as a true “commonwealth.”

Fact: The proposal is intentionally divisive and misleading. Special interest groups are using the popular vote and their ability to spend unlimited campaign funds to advance their own narrow self-interests by targeting a minority of citizens to foot the bill.

The proposal will not increase any citizen’s income, lower anyone’s tax rate, provide any new tax credit or deduction or provide any guaranteed benefit to anyone. There is no guarantee the revenue raised will benefit lower income citizens-or any citizen at any income level in any way.

Topics: Taxes, Income Surtax

The Constitutional Amendment Tax Trap - Myths and Facts, Part 3

Posted by John Regan on Jun 12, 2017 2:32:49 PM

Editor's note - Beacon HIll lawmakers will vote on Wednesday whether to place on the 2018 statewide ballot a proposed constitutional amendement that would impose a four percentage-point surtax (an 80 percent increase) on incomes of more than $1 million. AIM opposes the Constitutional Amendment Tax Trap and will look at the myths and facts surrounding the issue each day through Wednesday.

Myth: Without new tax revenue, Massachusetts’ economy will suffer.

Craneandworkerssmall.jpgFact: Massachusetts is thriving right now and our economy is expanding. Unemployment rates remain low and state tax revenues are at an all-time high.

During the past 20 years, Massachusetts has taken positive steps to shed much of its “Taxachusetts” moniker and high-tax brand. Adoption of the proposed tax increase would be a damaging step backward for the state. It will send the wrong message to many job creators and entrepreneurs: namely if you come to Massachusetts and succeed, we’ll punish you.

Myth: The new tax will help stabilize and strengthen the state’s financial foundation.

Fact: The proposal would inject significant instability into the state’s finances by adding billions of dollars in new, permanent special-interest spending to the state budget based upon on a volatile, non-recurring revenue stream.

Other states that have made the same mistake have found themselves in dire budgetary crises when estimated revenue failed to materialize. This year, Connecticut budget makers saw anticipated tax revenues drop by a staggering $450 million, putting the lie to a long history of promises that new and additional taxes on high income earners would solve the state’s fiscal challenges.

On April 28, Connecticut’s Democratic Governor Dannel Malloy was forced to acknowledge the state’s failed policy of trying to support ever-increasing state spending a too-narrow group of high income earners, publicly admitting "Connecticut is too dependent on our highest-income earners for our revenue.”

(Sources: Maryland Public Policy Institute; Hartford Courant 4.28.17)

Myth: Impacted taxpayers will remain in Massachusetts and pay the increased taxes.

Fact: The recent experiences of other states indicate that retirees and high-income earners often relocate to lower tax states in response to increased taxes.

Within three years of Maryland enacting its “millionaire tax,” 40 percent of the state’s seven-figure earners were gone from the tax rolls - and so was $1.7 billion from the state tax base.

Similarly, in 2010 Boston College researchers released a report on the migration of wealthy households to and from New Jersey. They concluded that wealthier New Jersey households did in fact consider the high-earner taxes when deciding whether to move to or remain in New Jersey.

The researchers’ data analysis found that from 1999 to 2003 - before the millionaires’ tax was imposed- there was a net influx of $98 billion in household wealth into the state. After the tax was implemented, an increasing number of wealthy families left the state, resulting in a loss of $70 billion in wealth.

(Source: Wall Street Journal, 2.7.12; Center on Wealth and Philanthropy at Boston College)

Topics: Taxes, Income Surtax

The Constitutional Amendment Tax Trap - Myths and Facts, Part 1

Posted by John Regan on Jun 8, 2017 1:26:49 PM

Editor's note - Beacon HIll lawmakers will vote on Wednesday whether to place on the 2018 statewide ballot a proposed constitutional amendement that would impose a four percentage-point surtax (an 80 percent increase) on incomes of more than $1 million. AIM opposes the Constitutional Amendment Tax Trap and will look at the myths and facts surrounding the issue each day through next Wednesday.

Myth: Massachusetts has a revenue crisis and cannot support the cost of essential state government services without new taxes.

Fact: Massachusetts is one of the highest spending states in the nation on a per capita basis. Revenue collection and state spending in the commonwealth have increased significantly during the past 15 years. In that time period the state budget has doubled to more than $40 billion dollars, a growth rate that far outpaces inflation.

State Budget by Year 2017.jpg

Massachusetts has a spending problem, not a revenue crisis. Fiscal Year 2016 state revenues were $4.7 billion more than they were just five years earlier. In just the past five years, Massachusetts has increased the sales tax rate by 25 percent, raised the gas tax by 14 percent and adopted major policy changes, including casino gaming, designed to raise billions of dollars in new revenue each year. 

Revenue Trends-1.jpg

Myth: Massachusetts under-invests in its K-12 public educational system.

Fact: Massachusetts taxpayers support the seventh highest level of per-pupil spending in the country with an average expenditure of $15,000 per student each year. Massachusetts students perform better than their peers across the country, evidenced by the National Assessment of Education Progress (NAEP) eighth-grade student performance in Science (1st), Reading (tie 1st) and Math (tie 4th). (Source: MATTERS.mhtc.org; NCES)

Myth: Massachusetts under-invests in its transportation infrastructure.

Fact: Year after year, Massachusetts spends significantly more per mile on highways than nearly every other state in the country. Currently, Massachusetts spends more annually to build and maintain each mile of highway than 47 other states and four times the national average. Yet the condition of our roads and bridges is among the worst in the country.

The state Department of Transportation and MBTA acknowledge they are unable to effectively spend the capital funds already available to them.

According to Transportation Secretary Stephanie Pollack “for years the T [has been] leaving hundreds of millions on the table, failing to spend it on desperately needed maintenance and repair projects. The T is like a bathtub full of holes. Turning the spigot to let more water in is not going to fill up the bathtub. We need to fix the holes.”

Before any additional funds are expended, the state transportation system needs to adopt significant additional structural and management reforms and improvements.

State Highway Spending.jpg

(Sources: MATTERS.mhtc.org; the Reason Foundation; Boston Globe, 9.2.15)  

 

Topics: Taxes, Income Surtax

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

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