Today, the MA House will be voting on H.89, a bill that deals with a number of important issues such as unemployment insurance, emergency paid sick leave, and more. This bill never had a hearing, and was rushed to the floor quickly. The text of the bill was only made public yesterday around 11AM. Why the rush? Well...
This bill includes an outrageous "Double Dip" tax break for big business. Under the bill as written, businesses that receive PPP grants (Paycheck Protection Program) won't pay taxes on those PPP grants and also would get to deduct expenses paid with PPP funds. The cost of this tax break isn't clear. Gov. Baker estimates the cost of this tax break to be about $130M, but MassBudget has shown that number is definitely too low, and isn’t possible to pin down exactly since we don’t know the full amount of PPP grants given last year.1 We at Act on Mass think we’re looking at a cost closer to $300M. What’s worse, the Coronavirus Relief Act passed yesterday in Washington would reduce Federal aid to states by an amount equal to any cuts in state tax. So we’d have to double our estimates of the cost to MA up to closer to $600M.
In a pandemic, with money needed for education, transportation and healthcare needs, we cannot afford this outrageous giveaway. The legislature limited this “double-dipping” to businesses that use the personal income tax passthrough method of paying taxes, so it wouldn’t affect corporate taxes. But plenty of big businesses including Fidelity pay taxes this way. Over the past few decades passthrough businesses have become more common because of the ability for those structures to avoid more taxes than traditional C-corps.2
But there's hope: Reps. Erika Uyterhoeven & Mike Connolly have filed amendments #8 & #5 to fix this problem. Amendment #8 would fully eliminate the tax break for big businesses. Amendment #5 would take the approach of states like VA which capped deductions to just $100,000. So small businesses would not be affected, but companies like Fidelity would be limited in their double-dipping.
Script:
Hi, My name is ________ and I’m a constituent of Rep. __________. I’m calling to ask the Representative to support amendments #8 & #5 to remove or reduce the “double dip” tax break that will cost our state millions of dollars at a time where we desperately need more funding for education, healthcare, and transportation. Can you confirm for me whether the Representative will support these amendments filed by Reps. Mike Connolly & Erika Uyterhoeven?
Footnotes:
1: For more analysis on the size of this break please check out: this report by MassBudget & this Commonwealth Mag article by Peter Enrich & Kurt Wise
2: More info on the growth of passthrough businesses here.
Photo by Andrea Piacquadio from Pexels