We did it! No expansion of the Single Sales Factor corporate tax break!
Since March, labor and community groups have raised our voices together against a tax break expansion for multi-state corporations in the Commonwealth. Billionaire corporations and their lobby groups, including Santander, State Street and Associated Industries of Massachusetts hoped to cash in on the expansion of Single Sales Factor (SSF) tax cut beyond its current limits via two legislations. But we knew expanding the tax cut could cost the Commonwealth billions, and would line the pockets of big businesses without keeping jobs in state.
What is SSF? It’s a tax formula that decreases the tax burden for Massachusetts corporations that make sales out of state. SSF was first adopted by the Massachusetts legislature in 1995 for defense and manufacturing corporations only. After lobbying by Fidelity Investments, the mutual fund industry was also able to cash in on the tax break — a move which has cost Massachusetts more than $3 billion in the last ten years and has not prevented job loss.
Even before the COVID-19 pandemic, our Commonwealth needed new revenues to support public education, transportation and other public goods. Today, with plummeting revenue and sky-rocketing needs, new tax cuts for wealthy corporations are more illogical than ever. That is why the Massachusetts AFL-CIO, MetroBTC, Mass Voter Table, Greater Boston Labor Council, City Life/Vida Urbana, GreenRoots and other organizations opposed two bills that would have expanded SSF. In fact, since mid-March, hundreds of people have told legislative leadership that the bills should not be passed.
Legislators listened, and the SSF bills will not become law. This is a victory to celebrate.
As Senator Jamie Eldridge, Massachusetts Teachers Association President Merrie Najimy, and Mass Voter Table Executive Director Beth Huang pointed out in an op-ed on Tuesday, stopping SSF expansion is not enough. We need all wealthy corporations and individuals to pay their fair share. “The prudent course of action is not to expand SSF, but instead to recoup some corporate tax revenue by ending SSF for mutual fund service companies. In recent years, this would have netted about $150 million annually toward state revenues,” the op-ed reads.
Rolling back mutual fund corporations’ access to the Single Sales Factors tax break is just one of a number of progressive taxation options the Commonwealth could enact to raise revenue for much needed public services now and in the future. For example, a group of Massachusetts economists has recently urged leaders to use progressive measures to raise new revenue, writing:
“Both the personal income tax and the corporate tax are fair ways to do this, since they fall only on persons with incomes and businesses with profits. A one percentage point increase in the income tax could raise $2.5 billion per year while a one percentage point increase in the corporate tax rate could raise $180 million per year, even if the income tax base falls by 25% and the corporate tax base falls by 50% during this recession.”
Massachusetts Budget and Policy Center has identified other ways to maximize state revenues at this difficult time, including stopping the introduction of a new charitable deduction, and re-aligning state tax code with the federal code when it comes to taxing Global Intangible Low-Taxed Income (GILTI).
We have more work to do to ensure state revenues meet COVID-era needs. But with the defeat of SSF expansion, we’re off to a good start.