In favor of Closing Corporate Tax Loopholes Included in Bill #s 4499 & 3756
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.
Before Chairwoman Creem, Chairman Binienda and members of the Joint Committee on Revenue
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.
Authors
Deirdre Cummings
Legislative Director, MASSPIRG
Deirdre runs MASSPIRG’s public health, consumer protection and tax and budget programs. Deirdre has led campaigns to improve public records law and require all state spending to be transparent and available on an easy-to-use website, close $400 million in corporate tax loopholes, protect the state’s retail sales laws to reduce overcharges and preserve price disclosures, reduce costs of health insurance and prescription drugs, and more. Deirdre also oversees a Consumer Action Center in Weymouth, Mass., which has mediated 17,000 complaints and returned $4 million to Massachusetts consumers since 1989. Deirdre currently resides in Maynard, Mass., with her family. Over the years she has visited all but one of the state's 351 towns — Gosnold.
