( – promoted by DD4RP)
The recently approved corporate tax reform package ushsered in by the Patrick Administration was a baby step in the right direction. The new rate will eventually drop to 8% in 2010 on a larger, less-loophole-ridden tax base. That will only happen if the majority party chooses not to play bait and switch which would send the wrong signals about the state's business climate. Given the recession, state GOP leadership suggests that the reform be repealed.
Corporations in Massachusetts will pay hundreds of millions of dollars more in state taxes this year: A law that takes effect today prevents companies from avoiding taxation by shifting profits out of the state.
The new tax provisions are expected to raise up to $400 million in additional funds. The Legislature passed them to combat some companies' strategy of moving profits to their business units in lower-tax states.
Under the new law, companies will have do what is known as combined reporting, which requires them to apportion tax payments, based on the amount of profit their operations earn in Massachusetts.
Companies will also be prevented from changing their incorporation status at the state level just to avoid paying taxes. Some companies will pay less under the changes.
But Republican lawmakers are trying to get the new law repealed, arguing that its implementation would be disastrous to companies that are already laying off employees and paring operations because of the recession. “In the long term, this could be devastating to the economy,” said Senate Minority Leader Richard Tisei, a Wakefield Republican.
He plans to file a bill to repeal the law. “Any economist would tell you that raising taxes in the midst of a recession is not a good idea,” he said. Democrats, who dominate the Legislature, said they intend to keep the tax changes in place.
More from the Boston Globe here.
A better plan is here.
Always keep in mind: true business tax reform's magic lies in simplicity. Broaden the base by eliminating exceptions and credits and lower the rate uniformly.