State Lawmakers Weigh Economic Growth Package
With just days to go in this year's legislative session, the Senate last week rejected broad-based tax cuts, unanimously passing a bill aimed at stirring job creation and economic development by investing in research and development, authorizing more than $1 billion in borrowing for energy efficiency investments, and providing tax-credits to start-up enterprises.
The Senate agreed to expanded tax credits, new investment funds and initiatives to free up financing for small businesses to expand, but Senate Democrats scuttled efforts by Republican leaders to also reduce the state income and sales taxes, which Republican lawmakers said would have the greatest impact on job creation.
The bill, approved 37-0, piggybacks off similar legislation endorsed by the House in late May.
The focus on job creation efforts in the session's waning days came as state officials released a report showing the state had lost 2,600 jobs in June, while the unemployment rate held steady at 6 percent.
The competing economic development bills will now have to be reconciled by a six-member House and Senate conference committee, which could be appointed today.
Expansion Of Bottle Law Passed
The Senate quietly and with little explanation adopted an amendment inserting an expansion of the state's bottle deposit law to water, juice and sports drinks. House Speaker Robert DeLeo, who has pushed hard for passage of the economic development bill, has also strongly resisted the deposit law expansion, likening it to a new tax.
Packed into the bill was a sales-tax holiday that calls for the state's 6.25 percent sales tax to be suspended on the weekend of Aug. 11-12 for most retail purchases under $2,500.
"This important economic stimulus in the form of a sales tax holiday is welcomed by consumers and Main Street alike," said Jon Hurst, president of the Retailers Association of Massachusetts. "The Legislature and the governor clearly understand that the consumer represents 70 percent of the economy and this proven tax incentive truly works."
Senate Minority Bruce Tarr said there was a lot in the bill to like, but after the debate the Gloucester Republican lamented the lack of appetite in his Senate colleagues to provide tax relief to consumers and businesses that he said would do more to spur economic growth than any new proposed initiative.
Tarr offered several amendments during the Senate's lengthy debate on the bill, including proposals to roll back the sales tax over two years to 5 percent, to scale back the income tax to 5 percent by 2015, and to stop the one-year postponement of the FAS 109 deduction, a component of a 2008 corporate tax reform law giving certain large multi-state corporations a deduction to absorb costs incurred by a new combined reporting requirement.
Tarr said allowing corporations to take the FAS 109 deduction as originally planned would put as much as $46 million back in the hands of businesses to invest in their workforces.
On the amendment rolling the sales tax back to its former 5-percent rate, Sen. James Timilty (D-Walpole) joined the four Senate Republicans in supporting a two-step decrease starting in August 2013 that Tarr said would have no impact on the current budget.
"I think it's unfortunate as we begin to emerge from the recession that we're not revisiting things like tax increases that make Massachusetts uncompetitive. Clearly the report that we got from CNBC is a wakeup call that the cost of doing business in Massachusetts is a factor that's affecting the economic recovery," Tarr said, referring to the cable station's rankings of business-friendly states that dropped Massachusetts from 6th to 28th in its recent survey.
Noting the loss of jobs reported by the state in June, Tarr said, "Against that backdrop, we're heading off to a new horizon to create jobs rather than working on basic issues that we know would have an impact like reducing taxes and creating more disposable income for folks to invest back in the economy."
Sen. Stephen Brewer (D-Barre) said the timing was not right to started reducing revenue streams for the state, warning that lowering taxes would cut into the state's ability to fund local aid, regional school transportation and other services at a time when tax revenues are growing, but the recovery is still precarious.
The bill includes the following:
- $50 million for a matching grant fund to support scientific and technology research sponsored by universities and other institutions, requiring every $1 of public funding to be matched by $3 in private financing;
- $2 million as part of a "talent pipeline" program organized through the Massachusetts Technology Collaborative to support paid internships and an entrepreneur and startup venture capital mentoring program; and
- $5 million for the Workforce Competitive Trust Fund to address a skills gap between available workers and employers, the extension of local permits and brownfields tax credits, and an increase on the cap on historic rehabilitation tax credits by $5 million to $55 million a year.
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