Patrick: State may cut firms' tax rates

Governor Deval Patrick suggested to business leaders yesterday that Massachusetts may soon be able to cut corporate tax rates, possibly in return for support of his quest to close so-called corporate tax loopholes.

Patrick's plan to close the loopholes this year ignited a furor among business leaders who considered it a tax increase, and led Patrick to work out a compromise plan with legislative leaders naming a special commission to study the state's overall corporate tax structure and corporate tax credits and breaks.

Referring yesterday to the commission's work while answering a question on corporate taxes at the annual meeting of Associated Industries of Massachusetts in Waltham, Patrick took a question about his quest to close so-called corporate tax loopholes. "We may well find we can reduce the overall corporate tax rate. That would be good news," Patrick said. But he quickly added: "I want to defer to the commission."

General corporations in Massachusetts are taxed at a 9.5 percent rate on their net profits. But there are several special taxes with different rates for firms such as banks, insurers, utilities, and businesses set up as partnerships that pay the same 5.3 percent as personal income tax.

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a business-backed group that monitors state finances, said it was the first time he had heard Patrick speak of the possibility corporate tax rates could be going down. But Widmer stressed it is crucial to know what other changes the commission, on which he serves, would recommend and whether they would mean businesses' overall tax burdens would increase or not. If Patrick means rates can be cut in return for businesses giving up certain credits and exemptions now, whether that's good for business on balance becomes a complicated issue, Widmer said.

"One of the things that can be looked at in the context of tax simplification is whether it's possible to drop the rate and have the corporate tax system become a competitive advantage for the state, rather than a competitive disadvantage," Widmer said. "It strikes me as a good thing, but you've got to look at it as a total package."

Patrick's so-called loophole-changing plan has been declared effectively dead by House Speaker Salvatore F. DiMasi, although DiMasi has backed the creation of the panel to review Massachusetts corporate taxes and how they affect the state's competitiveness.

Last month, DiMasi and Senate President Therese Murray agreed with Patrick to create a 15-person commission to study the corporate tax code.

Its report is due June 15.

The move came a week after House members approved a budget for the next year that rejected all of Patrick's corporate tax changes.

The panel was charged with coming up with ways to "modernize and simplify" business tax laws and to promote a fair sharing of the tax burden among individuals and corporate taxpayers, all in the context of encouraging business growth and helping Massachusetts compete for business.

"I hope the panel will find ways to make the code predictable and equitable to the business community and at the same time yield additional revenues for the Commonwealth," Murray said when the commission was launched.

Speaking to more than 600 businesspeople at the AIM meeting, Patrick reiterated that he looks to businesses as the key source of the state's economic growth and stressed he wants to be a pragmatic problem solver for the business community.

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