2010 Budget continued

One other thought on taxes. We are stuck in an old tax system that may not work as well as it should in the best of times. Our corporate taxes have decreased as a portion of revenues over the past decade and longer. We are arguing over increasing the gas tax as we look for alternative fuels and higher cafe (mileage) standards for cars. As we urge people not to smoke, we up the cigarette tax. All of this means that we need to recognize that these sources of taxation are diminishing over time and will not be able to carry our budget needs in the future. Add the sales tax to that. We are concerned over a higher sales tax sending more people to New Hampshire, or even elsewhere as the tax advantage on other borders is diminished or wiped out. We also know that more and more is being bought and sold over the internet and we don't tax that, which is already a disadvantage to local businesses. An increase in sales tax adds to that disadvantage. There is a diminished marginal utility to raising taxes in these areas.

Our reflex reaction seems to be to increase these taxes to make up the revenue shortfall, which further exacerbates the problem; or to "close loopholes", which leads to anti-competitiveness and further devolution of our tax base. We need a complete rethinking of how we tax and what we tax to bring it in line with a new economic paradigm. We no longer make widgets like we used to in Massachusetts, yet our tax policy is geared to that rather than finding new (and fair) revenue streams in new services or technologies. These don't necessarily have to be taxes. In the Life Science Bill, we included a portion that allowed us to take an equity position in new companies that we assist as start-ups. Perhaps other innovative ideas can be explored.

We also don't account for the fact that companies are global in scale today. In fact, we inhibit this with new tax policy that gives us the opportunity to look at a multinational companies holdings as a way to increase our tax take here whether they actually do business in Massachusetts or make money here. At a tine when we are trying to increase our share of new technological companies, this is a huge inhibitor to increasing our job base in state.