PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

State of the Week: Massachusetts

By at 24 May, 2017, 9:44 am

“Taxachusetts” Living Up to Its Name?

by Raymond J. Keating-

Small Business Policy Index 2017: Massachusetts ranked 37th among the 50 states.

SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2016: Massachusetts ranked 31st among the 50 states.

SBE Council’s “Small Business Tax Index 2016” ranks the states according to 25 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

Massachusetts To Get More Taxes?

Over the decades, Massachusetts earned the derogatory nickname of “Taxachusetts.” And given its rankings on the “Small Business Policy Index 2017” and on the “Small Business Tax Index 2016,” it’s hard to argue with such a moniker. Indeed, the state has worries not only on the tax front, but in other areas as well, such as regulation, and government spending and debt.

But rather than focusing on how to create a more welcoming environment for the entrepreneurship and investment that drive economic growth and job creation, Governor Charlie Baker and state lawmakers seem bent on pursuing higher taxes to keep feeding government spending that clearly is out of control.

Consider a Boston Globe report on May 16 that noted the following:

“The state Medicaid program, which provides health coverage to poor and disabled people, accounts for the single largest chunk of state spending — and its rolls have been growing. An increasing number of Massachusetts residents who are employed have been joining the program, according to administration data.

            “In response, Baker proposed a $2,000-per-employee fee on businesses, which business groups decried as an unfair new tax. The administration later floated an alternative plan that would spread the cost over more businesses by increasing an existing assessment called the Employer Medical Assistance Contribution. Senate leaders said they were open to that option.”

In addition, the state senate is looking to impose a tax on in-state rentals via sites like Airbnb.

Meanwhile, another report highlights other taxes being considered, such as a “millionaire’s tax” and a tax on “sugary” drinks. The proposed tax on high-income earners was described this way: “And the tax on high earners — via a constitutional amendment that would impose an additional levy of 4 percent on annual taxable income in excess of $1 million starting in 2019 and be tied to inflation — is likely to sail through the Legislature this year. It would be put to voters on next year’s statewide ballot.”

If that upper-income tax were to become law, that one tax increase – all other things being unchanged – would drop Massachusetts ranking on the “Small Business Policy Index” from 37th to 42nd, and on the “Small Business Tax Index,” the state would drop from 31 to 40th.

Of course, none of this is new for Taxachusetts, as noted: “‘It’s déjà vu all over again,’ groused Chip Faulkner of Citizens for Limited Taxation. ‘They overspend in the good times, and then when the revenue slows down or the economy slows down, their first talk is not of cutting the budget, but of slamming the taxpayers.’”

There are a host of problems with state lawmakers being focused on hiking taxes in a state where tax and other burdens already are quite high. In the end, it’s about draining resources away from productive, market-driven, consumer-disciplined, growth-generating undertakings in the private sector, and handing them over to politicians to dole out according to political wishes. That’s bad news for any economy.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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