© Suzanne Kreiter/Globe Staff Suzanne Kreiter/Globe Staff
As Maura Healy prepares to give her first speech to a corporate group as governor next week, she should be preparing to talk about taxes.
Still reeling from a losing battle over the so-called millionaires tax and the legislature's failure to pass a tax reform package, business leaders want the Democratic governor-elect to address policies they say are forcing people and companies to relocate or leave. Come here. .
Can Haley work with the legislature to improve the economic competitiveness of the state? It's a hot topic for Associated Industries of Massachusetts, which will host Healy on Jan. 26, along with several other business groups.
They want Haley to overcome the relatively high cost of doing business here by dealing with problems like slow housing development, congested roads, a dilapidated transportation system and inadequate child care. So such a demand to finally implement the tax reform.
"There are things you can do to send a message to the investment world. 'Forget the million dollar tax, we're open for business,' said Steve Tocco, president of Boston-based lobbying firm ML Strategies.
Then-Governor Charlie Baker started the conversation a year ago by proposing a package of tax cuts amid a huge budget surplus. The business community backed two of Baker's most costly proposals: cutting taxes on short-term capital gains and increasing the estate's tax base. Baker, a Republican, also proposed increasing state tax credits for child care, renters and the elderly.
Both the House and the Senate have passed versions of Baker's proposal, although neither house has passed a resolution to cut capital gains. But time ran out before their differences could be reconciled. The tax reform, to the dismay of businessmen, has been deferred until the next biennial session of the Legislative Assembly and the next governor.
"Obviously, we were disappointed that it didn't make it to the finish line," said Christopher Carlosi, state director of the National Federation of Independent Business.
Healy said he understands the urgency, but has yet to elaborate. The speaker said the new administration looks forward to "working with the legislature on efforts to make Massachusetts more accessible and to support seniors, working families and small business owners in these difficult economic times."
Corporate lobbyists are eagerly awaiting the estate tax change, in part because it could be a major factor when wealthy individuals and business owners decide which state to call home. Massachusetts currently taxes properties of $1 million or more in gross real estate value. Baker's proposal would raise that threshold to $2 million and only the amount over $2 million would be taxed. Massachusetts is a big exception. only one state, Oregon, has a threshold of $1 million, and properties are only taxed above that threshold.
Thanks to the tax millionaires' vote, also known as Question 1, teachers' unions and their allies in community advocacy groups stepped up and overspent the money. Starting this year, the measure would increase the state's current 5 percent income tax rate by 4 percentage points on household income of more than $1 million. Jokes begin to circulate that people with high salaries change their place of residence as a result. It will be some time before we have the data to back it up, but business leaders are already worried about the signal the award is sending.
The Tax Foundation, a Washington, DC-based corporate think tank, last week ranked Massachusetts 34th, roughly in the middle, in its latest state rankings for tax climate. But this calculation was based on government policy in July. Had the "millionaires' tax" been introduced at that time, Massachusetts would have ranked 46th, a statistic that would inevitably have been cited in arguments for tax reform.
"We need to step back and think about how we're going to compete with other states that, frankly, are more aggressive and play differently." said Jim Rooney, executive director of the Greater Boston Chamber of Commerce.
Another stat that will definitely come up. Massachusetts is already among the states with the highest population loss during the COVID-19 pandemic, even before the millionaires tax went into effect.
"Particularly the first question, why don't you pay the property tax?" said John Hurst, president of the Massachusetts Retail Association, who said two-thirds of his group's members plan to sell their businesses or retire within the next decade. "If you answer question 1 and don't pay property taxes, that's two shots in the stomach."
On question 1, Rooney said Healey may need to "look carefully" at the possibility of exemptions to protect so-called one-off millionaires; people whose business or property sales bring them more than $1 million at a time. year
Associated Industries of Massachusetts calls for a series of reforms. One of those proposals, a across-the-board cut in the income tax rate, would help offset the impact of Question 1. AIM Executive Vice President Brooke Thomson said the group's legislative plan is aimed at improving the "health of the state through policies that deter resettlement". and help businesses that cannot relocate. Thomson said he was pleased that Healy made it clear in his January 5 inaugural address that he was listening to the business community.
Some of the pro-business reforms could challenge the Democratic-controlled legislature, which voted overwhelmingly to include an additional income tax in the state constitution.
A spokesman for the Massachusetts Fair Share Coalition, which is behind the constitutional amendment, said that for the first time in its history, Massachusetts has "a fairer tax system that demands more from above." He said the coalition would fight any attempts to soften the prize.
Phineas Baxandole, policy director for the Massachusetts Left-Left Policy and Budget Center, said fears about the additional taxes are overblown. Proceeds go towards public education and transportation. Baxandall points out that companies will benefit from increased government investment in both areas. He said he is skeptical of a significant population exodus, especially since senior rates in California and New York still far exceed those in Massachusetts.
"Until they are halved, I don't think we should be wringing our hands over fiscal competitiveness," Baxandole said.
But Chris Anderson, president of the Massachusetts High Tech Council, said a "rapid migration of Massachusetts business leaders, wealthy individuals and job creators" is already happening, especially to states like Florida and New Hampshire, which have no income tax. the rent. .
Anderson said Healey should consider another recession this year. He proposed to seriously discuss the issue of removing the prize from the constitution. The multi-year process would require legislative approval, not to mention another statewide vote, no sooner than 2026.
"Massachusetts is the only state that went into recession … with the added burden of 'fiscal policy,'" Anderson said. “The only way to recover from this is to try to figure out how to get it out of the constitution. "
Of course, today it seems a far-fetched experience. But the fact that it's being discussed shows just how closely the business community is watching Beacon Hill right now, hoping for some kind of tax relief.
