Companies Celebrate, Suffer New Mass. Tax Rate

By Curt Nickisch
Jan 1, 2010, 5:06 AM
2 Comments

BOSTON — Massachusetts business owners are waking up New Year’s Day morning to a new corporate tax rate. Whether they’re celebrating or suffering may depend on the size of their companies.

Large, multi-state corporations are more likely to feel a hangover. The state law going into effect Friday subjects more of their income to Massachusetts’ relatively high corporate tax rate.

But smaller companies will be popping champagne corks.

“Any company solely located in Massachusetts will be better off under the new tax rate,” said Richard Lord, who heads the Associated Industries of Massachusetts.

For these smaller companies, the corporate tax rate drops from 9.5 to 8.75 percent. Financial institutions are subject to a separate rate, but it also drops for them, from 10.5 to 10 percent.

Those companies can start planning for next year’s party, too, because corporate taxes are set to fall again in 2011 and 2012.

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jeffe

I bet you will see some of these companies leave.
Why pay taxes here in when you can go to New Hampshire or any state with lower tax rates.
Michael Glik

I do not think any company makes its location decision based on Tax Rate — it is usually based on labor or customer convenience. What will happen is the revenue collection will go down (not up!). The taxes are mostly based on income, not revenue. Income is the deduction of expenses from revenue. If incentive of higher income is going down, then incentive is rising for expenses to go up. Expenses for a company (and its owners and employees) can be as valuable as income (trips, entertainment, real-estate, new line of business, friends’ something purchasing, etc.).

So simple logic dictates that the higher tax rate, the lower tax collection is going to be. I wish Massachusetts calculates/publishes ratio between revenue collection in different states in dependence of their tax rates, but then how will we satisfy our hunger of “taking money from the rich and give them to poor?”

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Companies Celebrate, Suffer New Mass. Tax Rate

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