As State Faces Revenue Shortfall, Advocates Continue Calling for Increased Corporate and Unearned Income Taxes to Avoid State Budget Cuts

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150+ Community, Faith, Labor, Public Health & Social Service Groups Demand Investment in Public Services to Aid Recovery from the COVID-19 Crisis

BOSTON – As state legislators hold a hearing to discuss the state’s potential revenue shortfall for the current fiscal year today, advocates for an equitable recovery from the COVID-19 crisis are continuing their call for increased taxes on profitable corporations and their wealthy shareholders to close the budget gap and invest in public services.

“With Republicans in Washington turning their back on Massachusetts and blocking additional stimulus measures, it’s clear that we’re on our own. The legislature must act to prevent economic disaster. Tens of thousands of Massachusetts residents are facing the threat of eviction, tightening their budgets as expanded unemployment benefits run out, and facing devastating cuts to the public services they depend on every day,” said Lew Finfer, Co-Director of the Massachusetts Communities Action Network and a co-chair of the Raise Up Massachusetts coalition. “Our public colleges are slashing their budgets and making layoffs when they should be working to accommodate the many unemployed workers who need job training. The MBTA is discussing major cuts to commuter rail, bus, and subway service that would leave many communities without transportation options. As we begin to experience another surge in COVID-19 cases, tens of thousands of Massachusetts workers still lack access to emergency paid sick time, and feel pressure to work when they might be sick because they have to pay the bills.”

“Lawmakers have a clear choice this fall: they can continue waiting for federal aid while budget cuts drag us into a deeper recession; or they can ask profitable corporations and their wealthy shareholders – those who are profiting during this pandemic while so many suffer – to pay a little more to preserve the public services we all depend on,” said Peter McKinnon, President of SEIU Local 509. “At this time when so many corporations are pledging to fight racial injustice, it’s time them to put their money where their mouth is and do their part to prevent destructive budget cuts that will hurt communities of color the most.”

In a letter sent to legislators last month, the Raise Up Massachusetts coalition and 157 Massachusetts organizations, including many public health groups and social services providers, called on the state legislature to raise significant new revenue from profitable corporations and their shareholders before making any budget cuts that would hurt Massachusetts’ recovery from the COVID-19 crisis. Since the letter was sent, additional organizations have signed on to the ‘Invest in Our Recovery’ campaign, which calls for increasing the tax rate on corporate profits, conforming to federal law for the taxation of domestic profits that are shifted overseas (known as GILTI, or ‘Global Intangible Low Taxed Income’), and increasing the tax rate that investors pay on unearned income.

Background

Fighting COVID-19, relieving the economic damage it is causing for Massachusetts workers, families, and businesses, and tackling the racial inequities that exist throughout our society – these urgent priorities all require state spending on education, healthcare, transportation, housing, safety net programs, emergency paid sick time, and other critical public services. But as a result of the COVID-19 pandemic, state and local budget shortfalls are already causing budget cuts, layoffs, and furloughs across the Commonwealth.

State budget cuts will only worsen the effects of the economic downturn, impair our recovery, and further harm the people and communities who are already disproportionately impacted by the COVID-19 pandemic, especially people of color, immigrants, and low-income communities. Our state lawmakers have a choice: we can let deep budget cuts drive us deeper into a recession that deepens racial inequities, or we can invest in public services that improve public health, grow our economy, and reduce 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.

Throughout this economic crisis, many large corporations continue to generate enormous profits that flow overwhelmingly to the wealthiest shareholders. 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, according to an Oxfam analysis. The 19 billionaires in MA saw their wealth increase by a total of $17 billion during the first three months of the pandemic. And for years, these large corporations and their wealthy shareholders have used loopholes, tax breaks, and weak corporate disclosure laws to avoid paying their fair share of taxes.

The ‘Invest in Our Recovery’ campaign, led by the Raise Up Massachusetts coalition, calls on legislators to adopt policies that ask profitable corporations and their wealthy shareholders to contribute more to support our economic recovery:

  • Increase the Tax Rate on Corporate Profits – Like most states, Massachusetts taxes corporate profits. Businesses that are turning a profit should be expected to contribute more to support the public goods on which their profits are based, especially during a public health and state fiscal crisis. Raising the current rate of 8.0% to the pre-2009 rate of 9.5% could generate $450 million to $525 million annually from profitable businesses, even during a recession.
  • Tax Profits Shifted Overseas by Increasing the Tax Rate on GILTI (Global Intangible Low Taxed Income) – Many multinational corporations that do business in MA dodge taxes by using complex accounting schemes that make their MA-based profits appear to have been earned in offshore tax havens. This “income shifting” often places these profits beyond the reach of US tax authorities. Massachusetts should do the same as many other states and the federal government, and adopt a federal provision that identifies this shifted income and allows states to tax a portion of it. Could generate $200 – $400 million annually.
  • Increase the Tax Rate that Investors Pay on Unearned Income – Over the last several decades, Massachusetts has reduced the tax rate on most types of unearned income (income from investments and other forms of asset ownership, such as stocks, bonds, and dividend and interest income). Today, most unearned income is taxed at the same rate as earned income (income from wages and salaries). Unearned income goes overwhelmingly to corporate shareholders and other high-income individuals, who currently pay a smaller share of their income toward state and local taxes in MA than the rest of us do. These high-income investors should be expected to contribute more to support the public goods on which we all depend. Each percentage point increase from the current rate of 5.0% could generate $400 to $500 million annually.

Polling shows that Massachusetts voters overwhelmingly support raising taxes on profitable corporations and their shareholders in order to make much-needed investments in our economic recovery, with each of these policies receiving support rates between 70 percent and 85 percent.

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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.