Community, Faith and Labor Coalition Highlights Corporations and Wealthy Shareholders Failing to Pay Their Fair Share to Support Our Economic Recovery
BOSTON – Six months into the COVID-19 public health and economic crisis, thousands of Massachusetts families are struggling just to get by, but many large corporations continue to generate enormous profits that flow to their extremely wealthy shareholders.
According to polling data released today by the Raise Up Massachusetts coalition, Bay State voters overwhelmingly support raising taxes on profitable corporations and their shareholders in order to make much-needed investments in our economic recovery. Advocates highlighted examples of prominent large corporations and their wealthy shareholders profiting during the coronavirus pandemic, and pointed to three state-level tax policies that would require them to pay their fair share.
“Massachusetts families are suffering immense economic pain while many large corporations continue to profit through this crisis,” said Max Page, vice president of the Massachusetts Teachers Association, a member of Raise Up Massachusetts. “Working people have made many sacrifices to help fight the coronavirus and get our economy back on a steady footing. Our polling shows that overwhelmingly, voters want companies that are hiding their profits overseas – or providing enormous payouts to their wealthy stockholders – to do their part as well.
“Now is the time for those who have the most to pay their fair share so we can invest in the public services that will power an equitable recovery,” Page said.
Results released by the coalition show that the three tax policies polled – increasing the tax rate on corporate profits, taxing corporate profits shifted overseas, and increasing the tax rate that investors pay on unearned income – have overwhelming support among Massachusetts voters, with each receiving support rates between 70 percent and 85 percent. In addition, more than 75 percent of Massachusetts voters polled supported the Fair Share Amendment, which is on track to appear on the 2022 ballot.
In calling for corporate tax policies during the COVID-19 pandemic, advocates called out the racial disparities created when corporations continue to profit from the labor of people of color who are bearing the brunt of the health and economic crisis. Black and Hispanic residents of Massachusetts, who are overrepresented in frontline occupations and industries, have experienced higher rates of coronavirus cases, hospitalizations, and deaths, and are significantly more likely to report lost jobs or wages, missed housing payments, or being affected by food insecurity during the pandemic.
“It’s undeniable that this recession and public health crisis is hitting low-income communities and communities of color the hardest, and state budget cuts threaten to make things even worse. Without action, damaging budget cuts to schools and colleges, hospitals, safety net programs, and other public services will worsen the economic pain, send us deeper into a recession, and intensify racial inequities,” said Marie-Frances Rivera, President of the Massachusetts Budget and Policy Center. “By asking the well-off to pay a little more with these three proven policies, Massachusetts can generate the revenue needed to prevent devastating budget cuts and instead invest in a robust and just recovery for all.”
Large Corporations Profiting Throughout the Pandemic
The polling results released by Raise Up Massachusetts show that more than seven in every ten voters (74 percent) support increasing the state tax rate on corporations from 8 percent to 9.5 percent.
A recent report from Oxfam found that 17 out of America’s top 25 corporations – including Apple, Comcast, Facebook, Johnson & Johnson, Microsoft, Pfizer, Oracle, Verizon and Visa – are making extraordinary profits during the pandemic, even as many small businesses and families struggle to get by. These profits could be invested in protecting workers and back into the economy. But Oxfam found that in 2020 the top 25 most profitable US corporations are set to distribute 99 percent of their net profits to shareholders – who are overwhelmingly white, predominantly male and mostly in the wealthiest 10 percent of Americans.
Massachusetts does not require these profitable corporations to pay their fair share of state taxes. A 2018 report by the Council on State Taxation (COST), a corporate trade association, ranked Massachusetts in the bottom fifth of all states in terms of overall business tax levels. COST also found that there are only eight other states in which businesses pay a smaller share of total state and local taxes. And just in the last four years, wealthy business owners and corporations have received federal tax cuts worth more than $275 billion.
To tax these profitable corporations without affecting small businesses that are struggling during the pandemic, Raise Up Massachusetts is calling for an increase in the tax rate on corporate profits. Returning the current rate of 8.0 percent to the pre-2010 rate of 9.5 percent could generate $375 million to $500 million annually from profitable businesses, even during the current recession.
According to the Massachusetts Budget and Policy Center, raising the tax rate on corporate profits would increase tax equity among racial and income groups because business taxes are paid disproportionately by high-income households – and because white households are twice as likely as Black or Latinx households to own any corporate stock.
Massachusetts-Based Profits Shifted Overseas
The polling results also show that more than eight in every ten voters (84 percent) support closing “the loophole that corporations use to lower their taxes by hiding assets ‘offshore’.”
Many multinational corporations doing business in Massachusetts avoid taxes through accounting schemes that make their Massachusetts-based profits look like they were earned in offshore tax havens. This “income shifting” often places profits beyond the reach of U.S. tax authorities. The 2017 federal tax law created a provision called Global Intangible Low Taxed Income (GILTI) to tax domestic profits that are shifted overseas.
One company with significant business in Massachusetts that is likely subject to GILTI is Amazon, which has grown its annualized worldwide profit from $3.1 billion in 2015-1017 to $12.6 billion in 2018-2019. In that time, Amazon increased its foreign income as a share of worldwide income by 37 percentage points, according to an analysis in the August 31, 2020 issue of Tax Notes. Amazon makes these enormous profits from the labor of its 500,000-person domestic work force, which is disproportionately Black, but none of the company’s top 22 executives are Black, and its profits overwhelmingly flow to wealthy white investors.
Raise Up Massachusetts is pushing to increase the state tax rate on GILTI for multinational corporations that shift their Massachusetts-based profits overseas. By joining many other states that match the federal requirement in which half of this income is subject to tax, Massachusetts could generate $200 million to $400 million annually.
Shareholders Gaming the Stock Market to Profit
The polling results also show that more than seven in every ten voters (72 percent) support increasing “capital gains” or “unearned income” taxes by 2 percent.
While the U.S. economy as a whole is in the largest recession since the Great Depression, the stock market has continued to soar, and wealthy investors and corporate shareholders have reaped the benefits.
For example, Cambridge-based pharmaceutical developer Moderna, a 10-year-old company that has never brought a product to market, announced in January that it was developing a COVID-19 vaccine. Amid a steady stream of press releases on its progress, but with limited peer-reviewed results, Moderna’s stock value more than tripled to a market value of almost $30 billion. Moderna insiders have sold about $248 million of shares since January, most of it after the company was selected in April to receive federal funding to support its vaccine efforts. Two executives, including the Chief Medical Officer, have sold all their stock holdings in the company.
After similar announcements, “insiders from at least 11 drug companies – most of them smaller firms whose fortunes often hinge on the success or failure of a single drug – have sold shares worth well over $1 billion since March,” according to The New York Times.
To tax these and other corporate shareholders who continue to make enormous amounts of money during the pandemic, Raise Up Massachusetts is pushing to increase the tax rate that investors pay on unearned income. Each percentage point increase from the current rate of 5.0 percent could generate $400 million to $500 million annually.
Over the last several decades, Massachusetts has reduced the tax rate on most types of unearned income. Today, most unearned income is taxed at the same rate as earned income. Unearned income goes overwhelmingly to corporate shareholders and other high-income individuals, who currently pay a substantially smaller share of their income toward state and local taxes in Massachusetts than the rest of us do.
Fair Share Amendment on the Horizon
In addition to these three revenue policies, Raise Up Massachusetts is the primary backer of the Fair Share Amendment, a proposal to amend the Massachusetts Constitution, creating an additional tax of four percentage points on the portion of a person’s annual income above $1 million.
The polling results released by Raise Up Massachusetts show that almost eight out of every ten voters (78 percent) believe an additional 4 percent state income tax should be levied on the portion of annual income that exceeds $1 million. Notably, support for increasing state income taxes on annual incomes over $1 million is strong across all major income categories. For example, increasing the income tax on the wealthy has the support of 83 percent of those earning more than $200,000 per year.
The amendment, which was overwhelmingly supported in a 147-48 vote in the Legislature’s Constitutional Convention last year, must receive a second vote during the 2021-2022 legislative session in order to be placed on the November 2022 ballot for voters to decide. If the voters approve it on the ballot, the Fair Share Amendment would generate approximately $2 billion per year in new state revenue.
With these revenue policies, the “Invest in Our Recovery” campaign aims to avoid destructive budget cuts that would only add to the harm the COVID-19 pandemic has caused and instead move forward with investments that improve public health, grow our economy and tackle racial inequities.
During each of the last three recessions (1990-1991, 2001-2002 and 2009-2010), Massachusetts lawmakers avoided deeper budget cuts by raising $1.1 billion to $2.5 billion in new revenue, delayed planned tax reductions, and/or reduced tax breaks for corporations. Even these actions were insufficient; these recessions still resulted in budget cuts that caused real pain in people’s lives and delayed investments that would have sped up economic recovery.
Raising progressive revenue to avoid budget cuts is the best way to avoid prolonging a recession – and it reduces racial inequality, especially when the new revenue is used to invest directly in Black and Brown communities. Evidence from the Great Recession shows that states that maintained their core state and local functions – keeping educators, firefighters, nurses and other critical service providers on the job – fared better during that recession and saw their economies grow more quickly once the recovery took hold.
The survey of 600 Massachusetts voters was conducted for the MTA as part of a poll largely focusing on public schools and education. Respondents completed the questionnaire online between July 24 and July 29, 2020. A memo on the results by the pollster, Echo Cove Research & Consulting, can be found here.
Raise Up Massachusetts is a coalition of community groups, faith-based organizations, and labor unions committed to building an economy that invests in families, gives everyone the opportunity to succeed, and creates broadly shared prosperity. Since our coalition came together in 2013, we have nearly doubled wages for hundreds of thousands of working people by winning two increases in the state’s minimum wage, won best-in-the-nation earned sick time and paid family and medical leave benefits for workers and their families, led the campaign for the Fair Share Amendment to invest in transportation and public education, and started to build an economy that works for all of us, not just those at the top. Learn more at raiseupma.org.