Rep. Jay Kaufman, Chairman Sen. Michael Brady, Chairman Joint Committee on Revenue
RE: House Bill No. 1501, An Act relative to closing off-shore tax haven loopholes
Dear Chairman Kaufman and Chairman Brady,
I write in support of the above legislation which would close the “water’s edge” loophole, which allows select multinational corporations earning profits here in Massachusetts to effectively shift them to offshore tax havens.
A basic principle of taxation is fairness. If a U.S. corporation earns a portion of its income here in Massachusetts, then it should pay its share of corporate tax on that portion, just like any other Bay State business.
This bill authorizes the Massachusetts Department of Revenue to designate a list of known “Tax Havens” based on objective metrics and calculate corporate tax liability based on the profits held in these tax havens.
State law already allows companies to elect “worldwide” reporting if they have significant business activity in designated tax haven jurisdictions. This bill merely extends the same logic we already apply to corporations with subsidiaries in other states. The core principle that income earned here in Massachusetts should be taxed here in Massachusetts, should be the same whether the profits are held in Delaware or the Duchy of Luxembourg.
It is estimated that closing this “water’s edge” loophole could recoup as much as $79 million annually to state coffers. Two states have already implemented this change and several other states have similar legislation pending. There is no economic evidence that ending the practice has deterred growth or investment.
At a time when budgets are tight, the bill present an unique opportunity for Massachusetts to bring in new revenue without raising taxes or cutting services –– and at the same time provide a more level playing field for the many Bay State businesses who compete in the marketplace without the benefit of such complex tax avoidance schemes. Let’s promote innovation and creativity in the marketplace, not in the tax code.
I have enclosed testimony in support of this bill from last session from Mr. Dan Bucks, who is an internationally recognized expert on this topic. Mr. Bucks served as the executive director of the Multi-State Tax Commission (MTC) from 1988 to 2004 and served as the Revenue Director for the state of Montana from 2005 through 2015.
I respectfully ask that you report this bill out favorably. Should you have any further questions, do not hesitate to reach out to my office.
REP. JOSH S. CUTLER Sixth Plymouth District