Patrick eases tone to reassure executives

BURLINGTON -- For two weeks Governor Deval L. Patrick has been talking tough about cracking down on companies exploiting what he calls corporate tax loopholes to save over $300 million a year in state taxes.

But hoping to soothe some hard feelings among Bay State business leaders, Patrick yesterday assured a powerful association of high-tech chief executives that he's not saying they're tax-evading scofflaws.

"I am not associating any moral judgments" with how companies are interpreting the tax code, the governor said at the annual meeting of the Massachusetts High Technology Council. He noted that when he was a top attorney for Coca Cola Co. and Texaco Inc., he constantly hired tax lawyers and accountants to find ways to shave tax bills.

"I am not talking about it being morally bad," Patrick said. "I am talking about this as an aspect of modernizing the tax code so we can make the kinds of investments we need to make for individuals and corporations in the Commonwealth."

Every big-business association in the state, including the High Tech Council, has blasted Patrick's seven proposed tax-code changes, including higher taxes on multistate corporations operating in-state, calling them job-killing tax hikes.

Even after hearing Patrick, the new council chairman, MKS Instruments Inc. chief executive John Bertucci , said: "If you increase taxes, it is certainly possible to imagine that businesses will be driven out of the state or they'll be put in such a competitive disadvantage that they'll stagnate and fail."

Bertucci said Patrick needs to consider how taxes affect business costs in Massachusetts compared to not just other states but other countries with much lower labor costs.

But Patrick, in his remarks, said he is confident his proposals won't "hurt our ability to compete" and could actually help reduce tax burdens on small and medium-size businesses that, he said, produce the most jobs in the state. "Rarely do businesses make decisions about investment based mainly on the tax code," Patrick said, but as part of an overall equation that includes the quality of local education and infrastructure.

Council president Christopher R. Anderson said he welcomed Patrick's kinder, gentler tone -- but still thinks the governor needs to stop using the word "loophole" because that "implies that you're doing something you shouldn't be doing or that was completely unintended by the law."

Despite the flap over the tax issues, a new survey by the council found high-tech chief executives are feeling better about running a company in the Bay State. A total of 75 percent call Massachusetts a good or outstanding place to run a high-tech company, up from 70 percent last year. More than two-thirds of respondents say their companies will add jobs this year. But only 14 percent of CEOs -- who generally responded before Patrick's tax and budget plans were revealed -- think the state business climate is improving, down from 20 percent last year.

As a group, business leaders' top priorities for state policy makers, according to the survey, are first implementing a long-term, tech-based economic development strategy; second, improving education from kindergarten through high school including higher academic standards and better training for math and science teachers; and third, opposing new taxes and ensuring tax policies make Massachusetts more competitive with other states to attract businesses.

Their next most important priorities, in order, are lowering unemployment insurance costs; improving transportation; strengthening the University of Massachusetts system; promoting the biopharmaceutical industry; and reforming medical malpractice insurance.

Peter J. Howe can be reached at howe@globe.com.