It's share and share unalike
In 2000, to just pick a year, my family paid $8,797 in state taxes.
I mention this because for years I have listened to business whine about how it is not appreciated in Massachusetts. Back in the day when the minicomputer was king and legends like Ken Olsen, Edson deCastro, and An Wang were riding high, the loudest whining came from Route 128. But it is a chronic disease that knows no industry bounds. Today the whiners-in-chief are the biotechers.
But by at least one important benchmark -- who pays what in state taxes and who does not -- Bailey Inc., with world headquarters in Central Square and a mere five people on the payroll, is a pretty substantial enterprise in Massachusetts. To compare: Bailey Inc., as noted, paid $8,797 in state taxes in 2000. Meanwhile, in that same year, a pretty good year for the economy and corporate profits, half of all the active corporations in Massachusetts, nearly 39,000 in all, each paid the minimum corporate tax, or $456. To continue: Ten of the state's 50 largest employers paid the $456 minimum tax that year, according to the state Department of Revenue. Of companies with sales of more than $10 million, 37 percent paid the minimum tax. And of companies with worldwide sales of more than $20 billion (that's right, $20 billion), one in 10 managed to pay just $456 in state tax.
So as a leading payer, it's my turn to whine: If my family is paying its share in taxes, should not Corporate Massachusetts do the same?
Tax avoidance has reached epidemic proportions among American companies. The General Accounting Office recently reported that fewer than 40 percent of US companies paid any federal taxes from 1996 to 2000. The effective tax burden for all US companies was around 30 percent through the 1990s, according to the US Commerce Department. But since the fourth quarter of 2001, companies have paid out just 20 percent of their profits in taxes. As The Wall Street Journal, hardly a lefty rag, noted this year: ''Investors who have come to expect -- and in some cases even demand -- that corporations perform acts of tax diminution may be in for disappointment from here because, short of an act of Congress, it is hard to see how the corporate tax tally could get much smaller."
State Senator Cynthia Stone Creem, cochairwoman of the Legislature's Joint Committee on Taxation, has spent nearly a year looking at the Massachusetts numbers and believes the trend is creating unhealthy inequities for individual taxpayers and businesses alike. Her solution: an alternative minimum tax, based on a small percentage of a corporation's net worth.
The business lobby will howl. Our no-new-taxes governor will call it a nonstarter. But Creem, a Newton Democrat, has developed a serious proposal that is a good place to begin an overdue discussion on corporate taxation.
Creem's bill is modeled on Connecticut's alternative minimum corporate tax, but should be considerably less burdensome for business. Under the bill, a company would pay a tax of 75 cents per $1,000 of net worth, as defined by its assets minus its liabilities. The tax would be capped at $5 million, which only the largest companies would pay. Overall, the alternative minimum tax could raise between $130 million and $190 million a year, according to the Department of Revenue.
''An alternative minimum tax based on net worth assures that a corporation's tax burden will be relative to its size and correlated to its use of state services," Creem said.
The anti-taxers like to say that corporations don't pay taxes, people do. That has never been as true as today. Before business just says no, it should consider these numbers from the Department of Revenue: In 2000, about 8,600 companies with revenues of $10 million or more paid an average of $70,133 in state taxes. Another 5,000 similar-sized companies paid only the $456 minimum. No one likes to pay takes, but it is easier to take if the other guy is paying his share, too.
Steve Bailey is a Globe columnist. He can be reached at bailey@globe.com or at 617-929-2902.
