The Governor’s proposed corporate income tax reform may be a first step but it’s a small one. This is a key issue for fiscal conservatives: how best to promote economic growth by attracting and keeping firms in the Bay State in an equitable and efficient manner. The Patrick administration has a long way to go in cleaning up the code and removing favorite tax breaks such as the ones granted to the film industry.
Full text here: http://www.boston.com/news/loc…
Governor Deval Patrick will propose a gradual reduction in the state’s corporate tax rate from 9.5 percent to 8.3 percent when he unveils his budget next week, a bid to win business support and jumpstart his stalled plan to tighten what he calls corporate tax loopholes, administration sources said.
The plan is an olive branch of sorts that Patrick is hoping will help revive a cornerstone of his legislative agenda that has failed to move in the face of strong opposition from the business community and House Speaker Salvatore F. DiMasi.
In a further bid to win corporate support, Patrick may also propose a freeze on an increase in unemployment insurance rates that is due to take effect in March, the sources said.
Patrick will unveil the budget provisions this morning at a Neponset Valley Chamber of Commerce breakfast.
The compromise may not be enough to win over business leaders. While the corporate tax codes would be tightened in January 2009, Patrick wants to delay his corporate tax rate reduction until 2010, and it would be phased in over three years.
Closing what the governor describes as loopholes would generate $297 million in the next fiscal year and $490 million a year after that.
But that would be offset by about $210 million a year in lost revenue, once the tax rate reductions for businesses took full effect. The net increase in new taxes for the state would be $280 million.
Some Patrick allies in the Legislature applauded the move. But other lawmakers have urged deeper corporate rate cuts, to as low as 5.3 percent, the same as the state’s personal income tax.
One business leader said Patrick’s plan does not offer enough relief.
“This isn’t any meaningful reduction,” Paul Guzzi, president of the Greater Boston Chamber of Commerce, said yesterday. “We need to do things that are pro-competitive. In our view, this package doesn’t fall under that category.”
For years, governors in Massachusetts have sought to tighten corporate tax rules as a way of providing a financial boost to the state during tough financial times.
This is a natural issue for Republicans who ought to push for deeper cuts in the rate while broadening the base. As usual, comments welcome.