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Report Questions $400 Million Business Tax Break

Sep 10, 2019 | State House News Service

By Chris Lisinski, State House News Service, Sept. 10, 2019

Massachusetts will forego almost $400 million in revenue this fiscal year due to a tax break offered to corporations that operate in several states, according to a new analysis by the Massachusetts Budget and Policy Center.

Under the so-called “single sales factor,” Massachusetts taxes multi-state companies based only on the sales that occur here, not on manufacturing, research or other business activity in the state.

That 1995 policy was fully implemented in 2001 in an effort to boost manufacturing employment, but MassBudget estimated in a report that the tax break will cost $398 million in fiscal 2020 revenue even though 40 percent of manufacturing jobs have vanished since the tax break was enacted.

“The single sales factor is an expensive tax break that has performed poorly,” Marie-France Rivera, president of MassBudget, said in a statement. “Every dollar lost to the single sales factor is a dollar that can’t be invested in transportation or education or that must be replaced by other taxes. We can’t afford to leave special business tax breaks unscrutinized – and we need to end those that don’t deliver.”

In a separate report on Tuesday, MassBudget said state taxes on businesses rank in the bottom fifth among states, producing what Rivera said is a “favorable business tax environment, despite regular claims to the contrary.”

As lawmakers prepare to debate a still-unspecified transportation revenue package and advance a proposed 4 percent surtax on annual household income over $1 million, business groups have argued against the idea that Massachusetts faces insufficient tax revenues.

The Massachusetts High Tech Council wrote in a newsletter last month that above-expected tax revenues show that there is no need for “billions in new taxes.”


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