Monday, April 28, 2008
Here in the North Berkshire community, we are pretty proud of the Massachusetts Museum of Contemporary Art (MassMoCA). It has inspired a lot of artists to come to this area and our offerings grow every year. This past Saturday night, there was an exhibit along the Hoosac River as it wends past the museum. Artist Ralph Brill and others came together to light up the river area. Here are a few of the pictures I took from this. In one, LED lights are changing colors and netting strung across the river catches the radiance. In another, lights behind a screen catch the ripples on the screening like it caught the ripples of the water. It was very interesting and beautiful. I should say that the pictures don't do justice to the exhibits. You really had to see the movement, witness change of colors, and hear the river. But they give you a taste of what we saw.
Moreover, there were hundreds of people out on this early spring night, catching the artwork and catching up with one another. It was a great event that I hope grows each year. Congratulations to everyone who worked on this project.
A few weeks ago, the House of Representatives passed a tax measure that created a system of combined reporting for corporate tax payments and a system called "check the box" as a determinate as to how one files in Massachusetts in the same manner as their federal tax filings. It also, over a number of years, lowered the corporate tax rate. This would do two things. It would provide a boost in state revenues this year and it would give in-state corporations a tax break over a number of years while eventually getting to a rate that was revenue neutral.
I filed an amendment to this that gave some specificity and predictability to the bill. I didn't think it would be very controversial. It was not meant to advantage the state or corporations as to the tax filings, but was meant to give everyone a clear understanding of what was expected of them. Well, I was wrong. There has been a tremendous amount of controversy over this amendment. That is unfortunate as I believe that we need corporations to pay their share in taxes, but we need a system where everyone knows what the rules are.
I have heard that this amendment was passed in the "dead of night". The amendment was filed along with other amendments early in the day and as a matter of fact, I was asked about it throughout the day's deliberations. A large number of progressive legislators sat in the Speaker's office along with the chairman of the Revenue Committee and myself and had a lengthy discussion of this bill. I was ready to debate or explain this if necessary on the floor, and we knew that if there were questions, the Senate had yet to take this bill up and we would have plenty of time to work on any issues before a bill was enacted into law.
I have read all sorts of comments on this since, mostly on blogs, but also email and newspaper comments. Much of what I have read isn't true. Corporate tax policy is very complex and arcane. There are no "loopholes" in the law, only tax policy. When we reform policy in an area that is so complicated, it isn't easy and a lot of issues surface. In this instance, we layered tax policy on top of existing tax policy and that has many different ripple effects on existing tax policy elsewhere in the statutes. We need to account for this. That is what I attempted to do in my amendment. The following is a reply to a post on Massachusetts Liberal's blog site. I don't know who the blogger is who runs this site, but he or she is fair and intelligent. This is my reply to their post on this issue.
“There are three basic arguments that I will try to make as succinctly as possible. That said, this is corporate tax policy and it is incredibly complex and arcane. That is one of the problems. We had an opportunity to change our tax policy, closing opportunities to game the system while making it much fairer and simpler through the tax commission, but that was not to be. So what we are now attempting to do is place a combined reporting statute on top of all other tax law in Massachusetts and it is a difficult fit.
I had no idea that this would be controversial. It was an amendment was in the hands of the clerk all day long and no one raised any objections until late in the day. And it is an amendment that seeks, not to give business or the Department of Revenue (DOR) an advantage over the overall goals of the legislation, but seeks to provide specificity to the policy therein. Most businesses that I have talked to have thrown up their hands and said that they understand that combined reporting is coming. But they aren’t sure what that means, as there are no specifics behind the original proposal. That troubles them and troubles me as it gives enormous power to DOR to set not just regulations over tax collection, but over tax policy. That concerned me and many of my colleagues in the House. I was attempting to provide transparency and predictability to our combined reporting bill. Now to the three issues:
First, there are very few tax attorneys among those who are criticizing this bill and we have heard a lot of rhetoric. Take, for instance, the Wall Street Journal article concerning Wal-Mart. What is lost in the rhetoric is that Illinois disallowed this tax shelter scheme and collected the taxes from Wal-Mart. It is now in court and I believe that Illinois will win. My amendment states that the corporation can claim 80-20 foreign status if 80% of their receipts, payroll, or property is sourced outside the US. In a state where we go after income derived in state from out of state taxpayers that may have made money here, I doubt we are going to accept that a foreign “paper” corporation is the source of payroll, receipts and property located within the boundaries of the state, or the country under combined reporting. Also, this “safe harbor” for legitimate outside taxes that have no nexus under combined reporting is something that DOR agrees with in principle. They have, however, failed to suggest alternative language.
There are other reasons for placing some percentage within the bill. Other states have similar provisions. Some have suggested that foreign countries take a dim view of our going after taxes they think are rightfully theirs. It may cost us more in time, audits and personnel to go after the taxes than they are ultimately worth. There are other issues that have been raised, such as apportionment (which tries to get to the policy of apportioning tax from different states with different tax policies), but this seems to be the focus for everyone’s ire.
Second is my suspicion of DOR numbers. I am very leery of their numbers for good reason. In this bill, their revenue figure for the administration’s proposal was tens of millions greater than their figure for House generated revenues even though the language of the bill was identical coming out of committee! This is not the first time this has happened, raising, I think, legitimate questions about their numbers. In the Life Science bill, my committee asked for an analysis of extending the Governor’s tax breaks without the yearly limitations included in his bill. We asked several times and were told they could not answer the question nor should they as the Governor’s bill limited tax credits to $25 million per year. Not only is it not their role to refuse a request based on policy, but it calls into question the honesty in delivering numbers in a timely and accurate manner. After being requested again by House Ways and Means, a report was sent to us on the effect of the administration’s suggested tax credits. In looking at the numbers, it was immediately apparent that the numbers were suspect. One company had given us a figure, based on their tax liability that was larger than the DOR number for every life science company eligible for this credit. The second set of numbers we received were just as bad. I believe that the Department of Revenue based on their responses, is more interested in setting policy than enforcing it. It is the responsibility of the Governor and the Legislature to set tax policy. The Department of Revenue should provide revenue analysis that is not tainted by politics or policy. In these cases, it appears that this may not be the case and that troubles me. However, people shouldn’t take my numbers at face value either. I believe we need an independent budget office to give us honest estimates without political pressure from any side. We need an office like the Congressional Budget Office – bipartisan and independent to study all our fiscal and revenue proposals for their cost and financial impact. This is the only way we can get numbers that are beyond question.
Third, it is clear to me that this issue is not about tax fairness, but increased taxes. If that is the issue, we should stop using the words “closing tax loopholes” and have an honest discussion on what a fair tax is for corporations. But that discussion should also be about what we want our economy to look like. If we are closing tax loopholes, should we open another seven of them in the life science bill? More importantly, we need to look at corporate tax policy in the context of cost here in Massachusetts. I hear very few businesses complain about taxes in Massachusetts. But we have the highest electric rates in the continental United States, the highest health care costs, the second highest unemployment insurance rates, much higher than US average wage rates, land development costs, regulatory costs, housing costs and transportation costs to name some of the factors of doing business in Massachusetts. We are still down over 90,000 jobs behind our 2000 figures and we are making it increasingly difficult to do business here. We need to take that into account.
A good friend of mine who passed away many years ago used to ask me, “Is it the first straw or the last straw that broke the camel’s back? It is the synergistic accumulation of straw.” If we pass this bill without clarification and predictability, business will not pack up en masse and leave the state. But they will make decisions based on what their costs are in other states versus the ability to be successful here. That is a shame as there are a lot of good reasons to build a business here. But we never get to those reasons as our above the line costs make decisions easy for firms to locate elsewhere. I am not suggesting that we roll back taxes for businesses. I am suggesting that we should be intelligent with our tax policy and if we are going to tax businesses with increased policy such as combined reporting, we let them know what the rules are with precision, specificity, predictability, and transparency. After closing “loopholes” several times over the last four years, we need to let the business community have a level of comfort that they can plan based on the law. That was the amendment that I filed attempted to do.”
The entire post can be seen here: http://baystateliberal.blogspot.com/
Sunday, April 13, 2008
One of the most incredible places I have been is South Africa. The people were wonderful and the scenery was magnificent. I was there on an international trade mission with the Council of State Governments a few years ago with Gov. Ruth Ann Minner of Delaware, Anthony Brown, who is now the Lt. Governor of Maryland, Baton Rouge Mayor Kip Holden, and many others. We met with federal officials in Pretoria, and with state officials in KwaZulu Natal. We met with officials at McCord Hospital in Durban concerning health problems in South Africa. HIV/AIDs is epidemic in KwaZulu Natal and the people at McCord are working to find ways to treat and educate people on health issues. It is a huge task that they tackle with great resolve and compassion. In Cape Town, we met at the American Consulate and found how the US was trying to help the new post-apartheid government.
Massachusetts has a sister province relationship with the East Cape Province that looks at long term goals of strengthening both parties. Massachusetts is trying to bring health care solutions, among other goals, to this very poor area. South African Partners, a non-profit in Boston has been working very hard to bring these two areas together and coordinate our efforts in Massachusetts.
This is one of the most amazing trips I have been on. Everyone I met wanted to learn and be given the tools to help each other. It was an emotional trip to a beautiful country. For all that we, as state officials could give in technical advice on how to govern or what trade opportunities there are for South Africa, I felt we received so much more in return by learning about human nature. There was such a wonderful grace and resolve in the people that we met. It was inspirational.
While in KwaZulu Natal, we met provincial officials at the Phinda game reserve. We were there for almost two days. Very early in the morning or late in the day, we took rides throughout the reserve to see some of the native land. These are a few pictures of the animals that we saw.
Saturday, April 12, 2008
I have been doing a lot of work over the last few years on the "creative economy". Everyone seems to have a different opinion on the definition of the term creative economy and a lot has been written about these. While many feel that this encompasses our cultural facilities and outlets, I feel that the term is far more expansive than just our artistic community. Clearly this is part of it, but we have been very creative in our economy since the beginning of the Commonwealth of Massachusetts. We don't have natural resources such as oil fields or precious metals. We don't have vast expansive corn or wheat fields. What we have are more colleges and universities than anywhere else on a per capita basis. We have used our ability to be creative and innovative to spur a creative economy in Massachusetts. That has been good for us.
In the health care field, we (the citizens of Massachusetts) created the first vaccine in the 1790's. Mass. General Hospital was the first to use a general anesthesia. We played a large part in mapping the human genome and have the largest cluster of life science companies in the US. Recently, UMass professor Craig Mello was awarded a Nobel Prize for his work on RNAi. This is phenomenal.
In the field of telecommunications, we have the telephone being invented in Boston and the first commercial use of fiber optics. We also saw the invention of the power transformer, first mutual fund, first safety match, first computer (Dr. Vannevar Bush at MIT, no relation) and much much more. We are number one in the number of small business innovation research grants per capita in the US, and we have the greatest number of patents filed per capita in the nation.
It is our ability to be innovative and creative that fuels our economy. I believe our educational institutions and our vast array of cultural facilities lead to this creativity.
There are two bills that I filed this year that, I believe, will help to keep this creative economy thriving. The first is a bill establishing a creative economic council within the Mass Office of Business Development (MOBD). The administration, to their credit, has already hired someone to lead this effort in anticipation of the bills passage. When the bill passes, it will establish an advisory board to help shape policy concerning the creative economy. The second bill establishes a working group within our educational system to develop a creativity index in our schools. I have every confidence that this bill will pass also. Not only should we encourage creativity, but also we need to identify best practices and spread these across all of our schools. I recently wrote an editorial in the Boston Globe with Dan Hunter, the executive director of the Massachusetts Advocates for the Arts, Sciences, and Humanities (MAASH). The following is that editorial. I believe this effort is as important as our push to improve our science and math skills. The hard sciences are important, but we have proven in Massachusetts time and again that our ability to innovate in these hard sciences is what drives our economy. I hope you enjoy the editorial.
Creative thinking in the classroom
The following appeared in the Boston Globe on February 23, 2008
Op-Ed by Dan Bosley and Dan Hunter
All the third-graders at Chase Street School in Somerset were on the floor under their desks - painting. They had been studying the Renaissance and the works of Michelangelo. And now the children were painting their own vision, Michelangelo-style.
Years from now, will they remember the facts of the Renaissance, facts that can be measured by a standardized test? Or will they remember how it felt to be in Michelangelo's skin and the challenge of articulating their individual vision?
They are likely to remember the art of creativity, something that is not measured on today's standardized tests.
Standardized tests use individual student performances to provide one measure of school achievement. This is valuable. But, because the tests are the only public measure of school success, schools have an incentive to "teach to the test" and to educate children to be test takers.
Is this all children need to learn? Are we adequately preparing them for the future? We have moved into an economy driven by ideas and innovation. Are we giving students the opportunity to develop creativity - the ability to generate ideas and then to critically evaluate potential?
According to a coalition of researchers, 81 percent of corporate leaders in America say that "creativity is an essential skill for the 21st-century workforce." In addition to creativity, these business leaders look for such skills as collaboration, problem solving, critical thinking, and oral communication.
We have proposed a bill that creates a new measure of accountability for schools in Massachusetts. With the Creative Challenge Index, a commission - comprising legislators, and business and community leaders working with the Department of Education and education leaders - would establish an index to measure how many opportunities schools provide for students to engage in the practice of creative work - taking a project from inspiration to revision to fruition. Through the index, schools can be rewarded for creative opportunities.
Schools that provide opportunities for creative work in the arts, music, drama, and dance would rise in the Index. So would schools that engage students in a broad range of creative activities, such as science fair projects, debate club, fashion design, filmmaking, or architecture.
The Creative Challenge Index would establish incentives for schools to foster creative skills through arts education and other innovative educational opportunities.
Students need this practice not only to succeed in our new economy, but to realize their potential as human beings. Indeed, many citizens value arts education and the practice of creativity.
"Coming from a technical job function, creativity is part of the essence of what we have our employee performance reviews based upon," said Nancy L. Barnes a logistics engineering technical manager. "The concept of 'creativity' stems from being able to explore in an art medium at a younger age and continuing to foster those skills throughout a child's 12 years in school."
Stephen McNulty, a Boston police officer, said, "All the aspects of music performance have transferred as critical skills. It also gave me the adaptability and confidence to succeed in this very different career. Everyone should have such an opportunity. Who would have thought that my choir director and music teacher would have such a profound effect on my life?"
John Langton of Waltham said, "I'm a computer scientist and work in R & D. Many of the skills necessary in the workforce require the ability to think creatively and constructively. The ability to write well and perform creative problem solving is indispensable in the real world, and intrinsically artistic."
Creativity is indispensable in today's world. Children need to practice creative skills in schools to become the source of innovation to drive the economy in the future. The Legislature should pass the Creative Challenge Index.
To be creative means asking, "How do you see the world and how do you see it in a way that no one else does?" Those questions lead to innovation - whether you are Michelangelo working under the ceiling of the Sistine Chapel or a Somerset third-grader painting under your desk.
Friday, April 4, 2008
During the recent casino debate, the question was thrown out asking what is the Legislature’s alternative for job creation. How do we help our economy and how do we create jobs? First, if one believes, as I do, that the casinos would not create new economic growth but just move revenues from other spending to the casinos, there is no new growth we have to replace. However, we do need to work on the economy constantly and we need to create new revenue for the commonwealth by creating new jobs.
I have been working on economic development for 22 years in the Legislature. The following is a list of some of the job creation programs that we have worked on in the past three years under Speaker Sal DiMasi. These are not all my initiatives, but I have worked on many of these and continue to try to put programs together to create new jobs. I don't believe in give away programs but feel we need to try to work with business to find ways to expand our economy. I also think that we should create programs for our Massachusetts businesses in order to work with our present employers rather than create programs trying to lure new companies here. That is important, but many states get caught up in a competition to bring businesses to their state with giveaway programs. That is a zero sum game and we should avoid those where possible.
Here is my list:
STEM CELL RESEARCH
Chapter 27 of the Acts of 2005
Despite objections of Governor Romney, Legislature enacted groundbreaking legislation to establish Massachusetts as a center for cutting edge, life-saving research with appropriate regulatory oversight.
LIFE SCIENCE BILL
As Passed by the House
The 10-year initiative includes $250 million in tax credits for life sciences companies that promise to create jobs in the Commonwealth and $250 million in direct research grants to encourage the best and brightest in the industry to continue research in Massachusetts, and $500 million in capital investments in the industry.
- Capital investments in the life sciences industry, including $90 million for the RNAi Center at the University of Massachusetts to promote the work of Professor Craig Mello, the Nobel laureate, $95 million to create a life sciences center at UMass-Amherst and $120 million to establish the Massachusetts Life Sciences Opportunity Relocation and Expansion Jobs Capital Program Trust Fund.
- Direct grants and programs for the industry, such as $40 million for seed money to address federal funding shortfalls for life science research, $30 million to aid post-doctoral and graduate students studying life sciences, the establishment of new grant programs to boost the biotechnology workforce ($25 million), and “requipment” grants ($30 million) that provide funding for the state’s vocational and technical schools to train the next generation of life science employees. This funding makes the future of the life sciences industry more inclusive for all of the residents in the Commonwealth.
- Tax incentives for certified $25 million companies per year, including a tax credit toward the purchase of property for life science companies, extending from five- to 15-years the tax exemption for life science companies and additional tax credits for companies located in Economic Opportunity Areas throughout the state.
ECONOMIC STIMULUS PACKAGE Chapter 123 of the Acts of 2006
Following statewide job growth listening tour, House passed a comprehensive stimulus package designed to make smart, bold investments in workforce training, infrastructure, technology and cultural facilities
$30 million for Brownfields Redevelopment Fund
$50 million for Historical Rehabilitation Tax Credit
$10 million to spur activity in the state’s life sciences and technology sector
$13 million for establishment of first-in-the-nation Cultural Facilities Fund; Annual appropriation will attract hundreds of millions of dollars in private investments
$23 million for workforce development and training programs
$100 million bond program for infrastructure improvements that encourage economic development.
House combated the excessive regulation and red tape that impede economic development and job growth in the Commonwealth by approving legislation to streamline the state and local building approval process
Provide technical and marketing assistance to communities that set 180-day permitting timeframe
Additional funding to assist Division of Administrative Law Appeals expedite decisions on development disputes and meet new requirement to issue decisions within 90 days of a hearing
Create new division of the state’s Land Court to focus exclusively on land use and environmental permit disputes.
BRINGING BRISTOL MYERS SQUIBB TO MASSACHUSETTS
Chapter 173 of the Acts of 2006
Beat out competitor states like North Carolina and New York, bipartisan Massachusetts effort persuades global drug giant Bristol-Myers Squibb to build a $660 million manufacturing plant at Devens; Company will create hundreds of high-paying jobs and produce ripple effect through economy as more life sciences companies choose to set up shop in the Commonwealth. The state provided upgrades to water, sewer, and electrical power to site (All public infrastructure) and the company pledged to spend upwards to three quarter of a billion dollars in Massachusetts. The key was having development ready land at Devens.
INFRASTRUCTURE INVESTMENT INCENTIVE (I-CUBED)
H.5253 – Engrossed by the House
New financing mechanism forged partnership between communities, state and developers in order to stimulate development and job growth across Massachusetts; Authorizes Massachusetts Development Finance Agency to sell bonds for public infrastructure improvements related to economic development projects; Income tax revenue generated from resulting new jobs would pay off bonds. This is for huge projects in a few key areas.
FILM TAX INCENTIVES
Chapter 158 of the Acts of 2005
Seeking to further facilitate job growth and make Massachusetts competitive with other states and countries, House takes action to attract multi-billion dollar movie industry to Massachusetts to create jobs, increase tourism and generate revenue for state and local economies.
FILM TAX CREDITS
Chapter 63 of the Acts of 2007
To increase revenue and spur job growth in the Commonwealth, the House passed legislation to provide the burgeoning Massachusetts movie industry with incentives to film here through meaningful tax credits. The impact was immediate, with ‘The Pink Panther 2’ moving its central location to Boston to take advantage of the credits.
MILITARY BASE PROTECTION AND DEVELOPMENT
Chapter 4 of the Acts of 2005
$261 million plan to expand and renovate Hanscom Air Force Base in Bedford and US Army Soldiers System in Natick will keep jobs in Massachusetts and bases open during 2005 BRAC review process. This is the base closing process. These bases employ thousands of people and we feel that we can keep them open to research commercial uses of new technologies.
Sales Tax Holiday
Chapter 81 of the Acts of 2007
For the fourth consecutive year, the House passed legislation to provide consumers with a two-day sales tax breaks and deliver a shot-in-the-arm to businesses throughout the Commonwealth in August. By all reports, the ‘holiday’ was another success for retailers, consumers and the Commonwealth.
FY ’08 Supplemental Budget
Chapter 122 of the Acts of 2007
The House passed a $278.7 million supplemental budget that closed the books on fiscal year 2007 and provided approximately $100 million for key economic development initiatives to stimulate emerging industries such as clean energy development and support growth industries such as life sciences. It also further funded the cultural facilities bill, an important tool for the Berkshires
Aid to Commercial Fishing Sector
Chapter 160 of the Acts of 2007
The House voted to provide financial support to the commercial fishing industry in Massachusetts through an appropriation of no less than $500,000.
Green Communities Act of 2007
H. 4373 Engrossed by House
The House unanimously approved bold energy reform legislation to promote the use of cleaner, renewable energy in Massachusetts. The bill establishes energy goals for the Commonwealth and acts to implement those goals through statewide clean energy initiatives and reforms. The bill provides incentives to individuals, business owners and municipalities to invest in energy-saving technologies and aims to reduce energy consumption at the state-level. This bill will spur the creation of jobs in green industries and encourage the growth of new technologies in green industries here in the Commonwealth.
FROZE UNEMPLOYMENT INSURANCE RATE
H. 4699 Enacted by House
House of Representatives moved to help spur the economy by approving a freeze to the annual unemployment insurance rate, which is expected to save employers $153 million next year.
BROADBAND DEVELOPMENT IN THE COMMONWEALTH
We are working with the Governor to fund a broadband initiative to make broadband ubiquitous across the state. This will encourage the development of business in areas that didn’t have the infrastructure. The Governor’s efforts are a result of the House initiative to create a Director of Broadband Development and further our information highways. Verizon has recently pledged $100 million towards this effort and we believe that we can “plug in” almost all of the unserved communities in Massachusetts
In addition, we have placed more resources in creating the Science, Technology, Engineering, and Math (STEM) initiative to further our technologies, the groundbreaking Cultural Facilities fund to rehabilitate and strengthen our creative economy, and much more. We have placed millions in workforce training programs that train or retrain our workforce for jobs in new technologies. These investments are particularly important considering that there are currently over 90,000 jobs across the Commonwealth that are unfilled. I co-chair this effort for the state.
In the Berkshires, we funded an initiative called the Berkshire Compact for Higher Education. This compact is designed to create new ways to bring education opportunities to Berkshire students, raise aspirations for our youth, and create new opportunities in the area.
Does this type of economic investment work? The answer is a resounding yes. However, unlike the quick fix solution proposed by the Governor with casinos, these programs need to take root and grow. As an example of this, let’s look at Chapter 19 of the Acts of 1993. This has been around long enough to take a good look at this programs track record. In its first nine years, the Act has created 55,000 new jobs, retained 97,000 jobs, and has created incentives that lead to over $9 billion in private investment.
Creating jobs and economic growth is not easy. We need to be intelligent about placing resources where they will be most effective. It is not the quick fix in search of fast revenues that will lead to solid and sustained growth in our economy; it is the deliberative strategy. A sustainable economy is one that grows in partnership with our government, our workforce and our business community. That is what we are working on.