Friday, February 16, 2007

Deval's Fix: Close Lonestar-sized Loopholes

The state needs money - or we'll face Romney-esque cuts. Businesses, by and large, are taxed easy - while citizens get smacked around by the government with new bankruptcy rules and all sorts of burdensome procedures. Mega-corporations in Massachusetts leave some gaping holes in the taxes they pay. For example, just look at what would put $200 million towards closing this state's fiscal 1.3 billion dollar gap...


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... 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. Expected new revenue: $200 million a year.

Doesn't that just... make sense? Shouldn't businesses have to pay the same proportion of taxes to a particular state as their profits they receive from that state? Isn't that, oh I don't know, fair? The Globe notes that Elliot Splitzer in New York is proposing the same changes to the Empire State. California and Illinois, both states with important cities and lots of corporations like Massachusetts, have apparently caught on too.

Another proposed change, which is just as clearly and unambiguously a loophole for corporations, is the rare ability for corporations in Massachusetts to declare themselves a Corporation in terms of federal taxes - but a "partnership" in Massachusetts, thus saving money. Umm, hello??? Either they're corporations or not. How much would mullah would that bring in? $100-150 million. That kind of insanity makes one wonder if our state legislators even wrote that law, or if it was something faxed directly from Bank of America, Gillette and State Street?

So far, that's 300-350 million dollars, which goes a long way to solving this year's upcoming budget crunch. Deval says there's another 50-100 million in other loopholes, but isn't as specific with the smaller fixes. While the Patrick administration warned that the money may not be entirely available in time for next year, our state clearly needs to revamp its entire tax structure in order to keep from getting in these budget crunches every few years.

Sometimes it isn't just the tax rate that's the problem - sometimes there are just unfair taxing practices that prevent those who could most afford it from paying their fair share. It's time to say enough to that nonsense. If people are going to have to cope with budget cuts next year, businesses are going to have to make concessions too. That's the only way to avoid the same kind of devastation left by Romney's service-cutting wake.

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