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A major part of the current Massachusetts budget crisis is attributable to the generous tax giveaways that legislators have bestowed upon their corporate friends. This is the conclusion of a recent study by the Massachusetts Budget and Policy Center that looked at corporate tax changes in Massachusetts. The study found that since 1982 annual corporate tax revenues have fallen $1.1 billion behind the level they would be at if they had grown in proportion to the state’s total personal income. As corporations contribute less, more of the tax burden has been shifted to the taxes paid by ordinary people. In 1968, sales taxes and corporate income taxes contributed about equally to paying the bills. Today, the sales tax delivers six times the amount collected through corporate income taxes.

Some measure of the extent to which corporate taxes have declined is evident in the fact that the state’s gross state product grew by 80% between 1990 and 2000, after adjusting for inflation, while the corporate excise payments grew by only about 20 percent.

It is not just active tax breaks that are the problem. The study notes that corporate tax avoiders have been aided by the legislators “passive acceptance of aggressive tax avoidance startegies – that is, the failure by elected officials to prevent corporations from manipulating existing tax laws to their advantage.” For example, corporations have learned to create secondary units in low-tax states and use them to hide profits made in Massachusetts. Legislators have looked the other way and allowed the tax system to become riddled with mechanisms for avoiding taxation.

According to Jill Stein, President of Massachusetts Coalition for Healthy Communities, ordinary taxpayers do not have access to the same loopholes, and thus they get hit harder each time corporations devise a new way to avoid taxes. “We could close these tax loopholes with fairly simple changes to the tax code. But legislators know they must depend on corporate generosity to fund their political campaigns and they are reluctant to take action against big donors who put them in office. It’s a cozy relationship between campaign donors and legislators that lets the tax system become less fair year by year.”

Stein noted that “Closing the corporate tax loopholes could go a long way to resolving our budget crisis. It’s a question of whether preserving health, education, and other vital services for constituents will be more important to legislators than serving their campaign fundraising friends. For the past ten years, legislators been choosing their donors over their constituents. Citizens need to speak out forcefully to change the priorities on Beacon Hill.”

To view a copy of the corporate tax study, Gone with the Wind, Click Here.


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