Advocates Call for Increased Taxes on Corporate Profits and Unearned Income to Fund Investment in Public Services
BOSTON – As COVID-19 cases in Massachusetts continue to surge, the economic toll is adding up: more than 1 million people in Massachusetts struggle to get enough to eat, tens of thousands of workers can’t afford to stay home from work if they have COVID symptoms, and the MBTA is preparing to make massive cuts to the commuter rail, buses, ferries, and trains. But today, the State Senate passed a FY21 budget proposal that largely level-funds critical public services without making major new investments in response to the COVID-19 pandemic and economic crisis.
The Raise Up Massachusetts coalition of community groups, faith-based organizations, and labor unions released the following statement in response:
“By using billions of dollars in one-time revenue, including federal aid and the rainy day fund, the budget passed by the Senate today, like the version passed by the House last week, avoids making extreme cuts in the current fiscal year, which runs through June 2021. But like the House’s budget, it fails to respond to the enormous needs that families are facing during the COVID-19 pandemic and the accompanying economic crisis, and its significant use of one-time revenues will only increase the size of the budget gap next year.
“The Senate budget doesn’t include emergency paid sick time for the tens of thousands of workers who, more than seven months into the pandemic, still feel the need to go to work even when they might be sick, potentially exposing others and spreading the virus. Massachusetts needs sustainable new revenue sources to invest in critical public services such as emergency paid sick time, housing and food assistance, and our public colleges. We need revenue to fully fund our public schools by implementing the Student Opportunity Act, and we need it to prevent massive cuts at the MBTA. Making these investments is how we will stop the pain that families are facing and get our economy going again.
“The best and most popular way to fund these essential services is by taxing profitable corporations and their wealthy investors. While working families and small businesses suffer, many big corporations and their wealthy stockholders are reaping major gains. It’s time they paid their fair share, and we’ve proposed three popular policies to tax corporate and investor profits: increasing the tax rate on corporate profits, taxing corporate profits shifted overseas by increasing the tax rate on GILTI, and increasing the tax rate that investors pay on unearned income.
“This month’s abbreviated budget process sets the stage for the FY22 budget deliberations in the spring, when legislators appear ready to have a full debate over the best way to raise desperately needed new revenue. Massachusetts voters overwhelmingly support policies that ask profitable corporations and their wealthy investors to pay their fair share, and Raise Up Massachusetts and our partners will continue to advocate for new revenue to fund the public services we need to recover and rebuild.”
In a letter sent to legislators earlier this fall, 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. 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.
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 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. Taxing 50 percent of GILTI income 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 $465 million annually during periods of strong economic and/or stock market performance.
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.
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.