Don't hamstring the Bay State with tax hikes

  • In this Sept. 9, 2021 photo, House Ways and Means Committee Chairman Richard Neal, D-Mass., presides over a markup hearing to craft the Democrats’ Build Back Better Act, massive legislation that is a cornerstone of President Joe Biden’s domestic agenda, at the Capitol in Washington. AP

Published: 9/22/2021 12:26:03 PM

Massachusetts business owners’ confidence shot up to pre-pandemic levels this summer. Employers expressed optimism about everything from their business prospects to their hiring plans, according to a new survey.

This outlook could get even rosier. The Senate recently passed a substantial infrastructure package that could improve our roads, bridges, sewer pipes and public transit — and create millions of jobs in the process. New federal funding could help fund numerous projects throughout western Massachusetts.

Both our state and national economy were in good shape prior to the pandemic, and that’s partly due to tax reforms enacted in 2017, which made the United States a more attractive place to do business.

Prior to 2017, the top U.S. corporate tax rate was 35%, well above the global average of just under 24%. That encouraged multinational companies to keep money overseas rather than invest it here in the United States. Cutting the rate to 21% brought us in line with the rest of the world — though even today, the average corporate tax rate in Europe remains below ours, at 20%.

But the 2017 reforms didn’t just make American businesses more attractive to multinational investors, increasing their competitiveness on the global stage — they also jumpstarted the stagnant economy here at home.

At the beginning of 2020, weekly real earnings for employees 16 years and older were a whopping 12% higher than they were before the cuts took effect. And the national unemployment rate dropped to a half-century low of 3.5%. Just before the pandemic, the unemployment rate in Massachusetts was as low as it had been in two decades.

Unfortunately, the specter of tax hikes isn’t off the table. The House just cleared the way for a second, massive social spending package that’d be funded with huge new levies on companies.

Raising the corporate tax rate now would drive companies away, and make life harder for those that remain. In fact, in a recent survey by the Business Roundtable, an association of chief executive officers, 71% of CEOs said that increasing the corporate tax rate would crimp hiring, and 75% thought it would reduce spending on research and development.

Given that Massachusetts is a world-leading hub for technology and pharmaceutical research, those numbers should give us pause. After all, it was Moderna, a Massachusetts-based startup, that developed the second COVID-19 vaccine granted emergency use authorization in the United States — a vaccine that has saved countless lives by now.

But if we take money away from businesses, like the biotech firms leading us out of the pandemic, they’ll have less left to invest in future research and development projects — or to invest in expanding and hiring workers. Working families might not pay directly out of their own pockets, but they would pay in the form of reduced opportunity.

As chair of the House Ways and Means Committee, Rep. Richard Neal, D-Springfield, will play a pivotal role in shaping the forthcoming spending bill. Reports suggest that Democratic lawmakers are pushing to raise the corporate tax rate significantly, to 26.5%.

Such a move would only threaten our economic recovery. Here in Massachusetts, we’re optimistic about our economy, but we’re still trying to regain our strength, and the COVID-19 delta variant presents an additional challenge. A tax hike now would be disastrous. I urge Neal to reconsider drastic tax hikes — for the sake of the state and the nation.

Sid Starks of East Longmeadow is a small business owner and financial advisor. He is formerly a TV news anchor, reporter and weatherman.

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