Crowd Gathers for Global Intangible Low-Tax Income Taxation Discussion
It’s quite unusual to see such a significant crowd showing interest in the complex issue of taxing “global intangible low-tax income” (GILTI). Yet, the organization Raise Up has made it a key focus of their political agenda.
A coalition made up of labor unions and progressive groups is organizing public hearings throughout the state this fall to rally support for their “Corporate Fair Share” initiative. Jessica Tan, who heads the Massachusetts teachers union AFT, remarked during a committee meeting that taxing offshore income aligns logically as a follow-up to the billionaires tax.
Raise Up and its backers are proposing to expand the taxable offshore profits from the current amount by a factor of ten to fund state services. However, representatives from the business sector contend that such changes would only exacerbate existing challenges to the state’s economic competitiveness.
This debate echoes discussions surrounding the billionaire tax, but there is a notable distinction this time around.
Enacting a surcharge on individuals earning over $1 million would necessitate a constitutional amendment, which is a lengthy process culminating in a statewide vote. Instead, Raise Up seeks to adjust the amount of offshore profits subject to a state corporate tax of 8% via legislation.
It fundamentally boils down to finances. Currently, the millionaire tax generates over $2 billion each year for transportation and education. In contrast, the anticipated revenue from changes to offshore income would only contribute a small fraction of that sum.
Raise Up claims the Corporate Fair Share could yield up to $400 million annually. However, the state Department of Revenue recently issued its own estimates, ranging from $106 million to $151 million, factoring in updates from the One Big Beautiful Bill passed by Congress in the summer, which replaced GILTI with the tongue-twisting NCTI.
Phineas Baxandall, a policy director at MassBudget, a left-leaning think tank, believes the policy makes sense. He pointed out that whether it’s $400 or just $100, it’s worth considering, especially given Massachusetts’s significant revenue deficit. While it might not close the gap entirely, it would certainly be beneficial.
At a hearing for the state House, Gina Frank, the political director for 1199SEIU, conveyed to lawmakers that this bill would mainly impact corporations with extensive offshore tax holdings. Her underlying message was that while these large companies have prospered over the past five years, many workers in Massachusetts have not seen similar benefits.
If the state’s business leaders were indifferent about the Raise Up campaign’s launch in January, they certainly are paying attention now.
On October 3, executives from major business organizations, including Massachusetts Associated Industries and the Massachusetts Business Roundtable, appealed to the co-chairs of the Ways and Means Committee, urging them to terminate the bill. They characterized the proposal as an “unprecedented, massive, and misguided tax increase.”
Industry representatives argue that if the proposal does generate as much revenue as claimed, it would mark the largest tax increase for employers in the state’s history, creating additional uncertainty in an already unstable business environment. One member of AIM mentioned that it could more than double their Massachusetts tax obligation, projecting a 60% increase.
Most states do not impose taxes on offshore income. Among those that do, many states with economies similar to Massachusetts apply taxes to only a portion of offshore profits. However, most New England states have adopted the more aggressive strategy advocated by Raise Up.
Raise Up has found a willing ally in Senator Jamie Eldridge, co-chair of the Ways and Means Committee. He previously sponsored the bill and criticized corporate tax reductions overall.
If the “Corporate Fair Share” proposal progresses, it will likely be included in a broader tax bill, according to Eldridge. He views this as an opportunity to recover substantial amounts of state revenue lost due to federal budget cuts.
A majority of Congress members might concur with this perspective; indeed, over 100 support the “corporate fair share.” Yet, the opinions of Congressional leaders are what truly matter.
Back in April, House Speaker Ron Mariano expressed skepticism regarding the Raise Up initiative, indicating concerns about its potential impact on Stop & Shop, a supermarket chain based in his hometown. At a hearing, Frank assured that Stop & Shop had nothing to fear.
Spilka, in a recent interview, was guarded about the idea of increasing taxes at this juncture. She acknowledged the Department of Revenue’s predictions that changes to the federal tax law would eliminate over $650 million in tax revenue from Massachusetts’s state budget in the current fiscal year.
Addressing these deficits won’t be straightforward. Raise Up is unlikely to relent until lawmakers feel a sense of accountability for not adopting its proposals as part of the solution.
