Incentive should be on chopping block

April 13, 2011

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RE “TO keep jobs, don’t kill tax incentives’’ by Michael Widmer and Jim Klocke (Op-ed, March 29): With Massachusetts facing serious budget shortfalls, now is exactly the time to reconsider tax expenditures adopted in years past. The single sales factor, the tax incentive allowing Massachusetts mutual fund companies and manufacturers to base taxable income only on sales in the Commonwealth, is one that should be on the chopping block.

The single sales factor cost $302 million in forgone tax revenue, according to the 2010 Department of Revenue Tax Expenditure Budget. News of the impending loss of 1,100 Fidelity jobs shows that this particular incentive, enjoyed by Fidelity, is no silver bullet for economic development. Common sense and economic research demonstrate that the impact of these incentives is just the opposite.

These tax breaks are gladly taken by corporations, but ultimately are not very important for business location or investment decisions. Other factors, including labor and rental costs, are far more important. Fidelity says its decision is driven by real estate costs, and is moving those jobs to Rhode Island and New Hampshire, both of which have higher business taxes than Massachusetts. At the end of the day, every lost tax dollar weakens our schools, roads, and public safety — things that companies and families value.

Jeff Thompson

The writer is an assistant research professor at the Political Economy Research Institute at the UMass Amherst.