Massachusetts AFL-CIO Testimony Before Joint Standing Committee on Revenue

March 5, 2008

Written Testimony of Robert J. Haynes, President, Massachusetts AFL-CIO to the Joint Standing Committee on Revenue

RE: Fairness in Addressing Budget Shortfall - Fairness in Corporate Taxes

The Massachusetts AFL-CIO wrote to the legislature last month and on prior occasions asking that the Unemployment Insurance rate not be frozen, so as to not jeopardize our Unemployment Insurance Trust Fund. We were profoundly disappointed that the House, Senate and Governor, all chose businesses over working people, and froze the U.I. rate despite our reasoned, fact-based objections that were grounded in the lessons of past experience.

That said, I offer this testimony today asking you not to make the same mistake of outlandish corporate handouts. We applaud the Governor for proposing corporate loophole closings and praise the legislature for embracing the notion as well. However, we have a substantial revenue problem in this Commonwealth to address. We must have fairness in solving the budget shortfall and in our tax system.

The Massachusetts AFL-CIO urges the Committee to move to adopt the "check-the-box" and "combined reporting" loophole closing reforms in order to both achieve fairness in our tax system and address our budget woes. It would not be fair or prudent, however, to turn around and give all the direly-needed revenues achieved by loophole closings back to the corporations who should be paying their fair share of taxes anyway.

These corporations seem to have amnesia. They have apparently forgotten the forty-plus corporate tax cuts that the Commonwealth of Massachusetts gave them in the 1990s and earlier part of this decade. "Taxachusetts" has not been the reality for quite some time. We are fortieth in the nation in total corporate tax burden. It is time for Corporate Massachusetts to stop crying wolf and start contributing to the services on which they rely to achieve their success. Closing corporate loopholes without a drastic corporate tax rate cut is a step in the right direction.

According to the Massachusetts Budget and Policy Center these are the financial realities of current proposals to close corporate loopholes and cut corporate tax rates: If the loopholes are closed but the corporations are given another gift of a drastic cut in the corporate tax rate to 7-percent, the net new revenues in 2011 will be a mere $44 million. Should corporate loopholes be closed and a rate cut to 8.5-percent be handed to the corporations, $184 million will be gained in new revenues in the first year. Yet last month corporations were given a $153 million break on the U.I. rate freeze, meaning an addition really of only $31 million in new contributions by corporations next year. In these times of a $1.3 billion budget deficit it seems monumentally unfair to propose asking so little of corporations. The only thing that would be more unacceptable is when we fast forward to 2011, when corporations would only contribute a measly $44 million in new taxes. The numbers tell the story, and it is an unfair one.

We are not naïve to the demands of the modern economy or the threats that employers make about abandoning Massachusetts. Corporations can cite high taxes all they want, but the reality is only ten states in the nation have lower corporate tax burdens than does our Commonwealth. None of them have the intellectual capital, skilled workforce or strong infrastructure, challenged as it is, that is resident in our Commonwealth. No matter how low the corporate tax burden gets in our state, one thing is for sure: It will never be enough for businesses; they will never be satisfied, nor will they ever stop threatening to leave.

U.S. Census Bureau data from the early part of this decade indicates that nearly 43,000 citizens are leaving Massachusetts on an annual basis. Only New York State has lost more residents. Regular citizens are sick of playing more of a role than their employers, on taxes, on health care, really on all the social responsibilities of the day. Workers in this state are fed up with shouldering an unbelievably disproportionate share of the cost of government services, while receiving a pittance of the benefits of those services compared to what businesses reap. Maybe if the Massachusetts AFL-CIO set up a day where every citizen who was considering leaving the Commonwealth went to the State House to make the same threats of flight that businesses make, we would get the point across. All the people of Massachusetts ask is for fairness. Closing corporate loopholes without a drastic corporate tax rate cut is the least this Committee, the legislature, the Governor and this Commonwealth can do to achieve that fairness.

The Massachusetts AFL-CIO represents 400,000 taxpayers, voters and their families. I urge you on behalf of these hard-working families to do the right thing: Resist further corporate welfare, demand that employers play a larger role in shouldering the burden of closing our budget gap by closing loopholes, and reject a drastic corporate tax rate cut. It makes no sense to close loopholes and give nearly all the money back to companies who already have plenty, especially when other proposals out there are asking everyone except corporations to do their part.

Thank you.