I hope you will support
measures to close all the corporate tax loopholes outlined in the Governor’s
bills 3756 and 4499.
As you know, in January the
Special Commission on Corporate Taxes recommended closing a number of loopholes
– two critical and long overdue ones are commonly known as Check the Box and
Combined Reporting. The Check the Box reform, already in place in 45 states, simply
requires that corporations file as a consistent corporate form on both Massachusetts and
federal taxes and will prevent $170 million in corporate tax avoidance.
The other loophole-closing reform, called Combined
Reporting, is another significant step towards preventing some of the extreme
tax avoidance practices going on today, while also serving to eliminate a wide
array of potential future loopholes that tax collectors haven’t yet caught
onto.
Combined Reporting will put an end to the elaborate shell
games that some businesses play with out-of-state subsidiaries, avoiding an
estimated $220 million annually in state taxes. These schemes leave in-state
businesses that pay their full share of taxes at a competitive disadvantage. Twenty-two states have adopted combined reporting
laws, including our neighbors in New
Hampshire, Maine,
and Vermont. Combined
Reporting will put an end to tricky tax-avoidance transactions between
subsidiaries by requiring affiliated firms to file taxes together and pay taxes
based on their combined in-state business activity.
I am also delivering to you a petition with almost 2,000
names of residents who are urging you to support closing the loopholes outlined
in the commission’s report.
Lastly, whether you support raising or lowering the
corporate tax rate, restoring the integrity of our tax system by closing gaps
in the rules should not be held hostage to separate issues about the
appropriate tax rate. Imagine the uproar if Barry Bonds had told Major League
Baseball that he’d be willing to give up steroids if the home run fences were
moved in far enough.
Please see our recent op-ed on
tax loophole and baseball on the back of this testimony.
