Large corporations and their wealthy shareholders have used loopholes, tax breaks, and weak corporate disclosure laws to avoid paying their fair share of taxes for years. In the last four years alone, large corporations have received federal tax cuts worth billions of dollars a year in Massachusetts.
And during this economic crisis, many of these corporations have continued to generate enormous profits that flow to their extremely wealthy shareholders, even as most families are struggling just to get by. It’s time that they pay what they owe to support our economic recovery.
Raising progressive revenue to fund needed public goods—including public transit will — help prevent a long recession, fight inequality, and advance economic opportunity. Legislators should adopt policies that ask profitable corporations and their wealthy shareholders to do their part for our economic recovery.
- Increase The Tax Rate On 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% to the pre-2010 rate of 9.5% could generate $375 – $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 through accounting schemes that make their MA-based profits look like they were earned in offshore tax havens. This “income shifting” often places profits beyond the reach of US tax authorities. MA should follow many other states and match the federal provision that makes half of this income subject to tax. This could generate $200 – $400 million annually.
- Increase the Tax Rate that Investors Pay on Unearned Income. Over the last several decades, MA 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 substantially smaller share of their income toward state and local taxes in MA than the rest of us do. These wealthy investors should 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 – $500 million annually.