By Sen. Richard Tisei/From the State House
Posted Sep 23, 2010

Stoneham —
Last week’s announcement that the state added 4,000 new jobs in August was overshadowed by the release of a report that shows many employers believe the business climate in Massachusetts is actually worsening due in large part to “uncompetitive” and “unpredictable” tax policies.

According to a survey of Massachusetts business leaders, 77 percent believe taxes – not jobs – offer the best indicator of the state’s business climate. The survey also found that Massachusetts has been unable to “create jobs at a rate which matches the state’s need for revenues,” and warns that the commonwealth is losing ground to other states because its tax policies have made it less attractive to businesses.

This is just some of the sobering news that can be found in Keeping Massachusetts Competitive: The Business Climate in Context. Released on Sept. 16, the report is a joint collaboration between the Pioneer Institute, an independent think tank, and the Massachusetts High Technology Council (MHTC), a non-partisan business organization comprised of chief executive officers from the state’s top technology employers.

The new report confirms what many other studies have already shown: compared to most other states, Massachusetts continues to be perceived, both locally and nationally, as one of the worst states in which to do business.

Massachusetts ranked 49th in CFO Magazine’s 2009 survey of the states due to its unfavorable tax climate, ahead of only California, while finishing as one of the five worst states for business in a 2010 CEO Magazine survey. Just last month, a report released by CNBC ranked Massachusetts 39th in business costs and 41st for its cost of living.

According to the Pioneer Institute/MHTC report, “Massachusetts offers compelling advantages to companies looking to expand businesses or start new ones, but other states are chipping away at the state’s advantages in this area.” The report identifies “the cost of doing business and an unfavorable and unpredictable tax environment” as the chief culprits placing Massachusetts at a competitive disadvantage.

Following eight tax increases over the last four years – including a $500 million increase in corporate taxes in 2008 – an alarming 56 percent of survey respondents believe the tax climate in Massachusetts is “less positive” than other states. One of the chief criticisms raised by business leaders is that the frequent changes in the state’s corporate tax code don’t seem to be based on any particular long-term economic strategy, but instead appear to be driven solely by the short-term need to generate increased revenues for the state.

“Several respondents said that they feel that the state only views them as a source of revenue during difficult times, while it does little to support their businesses on an ongoing basis,” the report notes.

Although Massachusetts has a highly skilled workforce and other built-in advantages over other states, the report maintains that Massachusetts can’t simply rely on its historical strengths to attract businesses and create jobs. Instead, the state needs to “actively compete in all aspects of business climate.”

One of my chief criticisms of the Patrick-Murray Administration is that it’s targeted certain high-profile industries for tax breaks while neglecting to pursue more broad-based economic policies that will help all sectors of the business community.

The Pioneer Institute/MHTC report takes a similar position, arguing that “policymakers must avoid splashy, high profile efforts to attract marquee firms or sectors and focus instead on improving the foundation for our entire tech-based innovation economy to better position Massachusetts as a place where innovators want to work, entrepreneurs want to start companies, and employers want to grow their businesses.”

The report cites frequent changes in the corporate tax code, high unemployment insurance costs, and health care volatility as some of the key obstacles that stand in the way of employers adding new jobs. With more than 300,000 Massachusetts residents still unemployed, these are some of the problems the governor and the Legislature need to start addressing to help get people back to work.

Individuals and businesses have been hit with more than $1 billion in tax increases over the last four years. This has clearly had a detrimental impact on the state’s business climate and contributed to the doubling of the state’s unemployment rate, which recently reached its highest level in 34 years.

Massachusetts simply cannot afford to lose more jobs. Instead, Beacon Hill must refocus its efforts on finding ways to make the state more competitive and attractive to employers. Reducing taxes is one of the most effective ways to spur sustainable jobs creation and get the Massachusetts economy back on track.

Sen. Richard Tisei represents the 3rd Middlesex District, which includes Stoneham.