Raise Up Massachusetts, 157 MA Organizations Call for Increased Corporate and Unearned Income Taxes to Avoid State Budget Cuts

In News, Press Releases by News Desk

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

BOSTON – In a letter sent to legislators today, 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.

“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,” reads the letter. “As lawmakers, you have a choice: you can let deep budget cuts drive us deeper into a recession that deepens racial inequities, or you can invest in public services that improve public health, grow our economy, and reduce racial inequities.”

The letter suggests three state tax policies that legislators could implement to raise significant new revenue from profitable corporations and their shareholders: 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.

The letter also highlighted a memo on recent polling that shows that the three policies have overwhelming support among Massachusetts voters, with each receiving support rates between 70 percent and 85 percent.

Background

157 organizations and hundreds of individuals across the state have joined the Raise Up Massachusetts coalition in the “Invest in Our Recovery” campaign, which 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.

As many large corporations and their wealthy shareholders continue to profit during the COVID-19 crisis, the ‘Invest in Our Recovery’ campaign supports policies that ask them to contribute more to 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-2010 rate of 9.5% could generate $375 million to $500 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 couple to a federal provision that identifies this shifted income and allow 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.

###

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.