By Kyle Cheney
STATE HOUSE NEWS SERVICE

STATE HOUSE, DEC. 19, 2007…..As the state comes to grips with another batch of gloomy late-fall budget projections, hundreds of millions of dollars may hang in the balance, all hinging on policymakers' interpretation of a single word: meaningful.
“Meaningful” was the ambiguous definition that a special panel on corporate taxation overwhelmingly adopted Tuesday to quantify its recommendation on the size of a cut in the state's corporate excise tax – now at 9.5 percent, the fourth highest in the country.

Other words bandied about by commission members included “sizeable” and “substantial,” but no specific number will make it into the commission's final report – due Jan. 1, 2008 – and provide true definition.

“The exact rate cut had better be left to the governor and Legislature,” said Administration and Finance Secretary Leslie Kirwan, chair of the 15-member corporate taxation commission. “I would not like to venture to make a particular recommendation.”

Kirwan said she was unable to say when she'd have a more specific recommendation for an excise tax cut but that everything would be considered during budget negotiations. Kirwan is drawing up the governor's fiscal 2009 budget proposal, which is scheduled for release in January and may reflect the administration's preferred corporate tax policy adjustments.

A rate cut would, at least in part, offset $400 million to $500 million in corporate tax increases that would result from another commission recommendation: to tighten business filing regulations and capture more revenue. The commission voted 10 to 5 to reform the "combined reporting" and "check-the-box" provisions of the tax code. The combined reporting provision would block firms from shifting profit-reporting out of state to subsidiaries, while "check-the-box" would force companies to file under the same status on both state and federal tax forms.

The inclusion of the cut in the commission's final deliberations mollified some critics who insisted that any tax increase without extending an olive branch to the business community would be unacceptable.

Rep. John Binienda (D-Worcester), House chair of the Committee on Revenue, reversed his position on revenue neutrality. At an earlier meeting, Binienda distributed an outline that stated, “Overall revenue neutrality is a pre-condition for the consideration of any component of this proposal.” But Binienda voted Tuesday in favor of the report.

During deliberations, some commission members expressed frustration at the group's inability to recommend a concrete rate cut. One member, Senate Minority Leader Richard Tisei, said the commission was essentially saying a tax increase was acceptable but “the tax cut's in the mail.”

Tisei's House counterpart, Brad Jones, also a commission member, said he would define “meaningful” as a reduction of the excise tax to about 6.75 percent, or any amount that offset the expected increase, creating a revenue-neutral balance.

“Any recommendation that we make as a commission is going to be left to others to change, modify and implement,” Jones said. “I think we had an opportunity to really come up with a comprehensive plan.”

The divisions among members were apparent during the freewheeling commission meeting, with some questioning whether a single report could fairly reflect all of their nuanced views.

Commission member Michael Widmer, president of the Massachusetts Taxpayers' Foundation, said in an email to others on the tax panel that he was “troubled by the report's lack of balance.” Widmer questioned some of the numbers that ultimately made it into the report, and worried that some of the final language was “oversimplified.”

Widmer was one of the five members who insisted on revenue neutrality as part of any tax reform package.

Kirwan said commission members have until Friday to submit any comments or caveats to be included in the final report, which she assured them would contain an accurate depiction of the dissent over revenue neutrality.

The commission's decision immediately set off a press release barrage, with many of the commonwealth's special interest lobbies offering degrees of support for corporate tax hikes.

Gov. Deval Patrick immediately issued a statement praising the commission's results.

“By closing corporate tax loopholes like combined reporting and “check the box,” we can ensure a tax code that is fair and equitable for all businesses,” he said. “By lowering the corporate tax rate, we also ensure that Massachusetts retains its competitive advantage and remains an attractive place for businesses to expand or locate. I look forward to working with the Legislature to implement the recommendations put forth in the Commission's report.”

Joining forces, many of the state's unions, including the Massachusetts Teacher's Association, the Progressive Democrats of Massachusetts and Neighbor to Neighbor, praised the commission's inclusion of check-the-box and combined reporting reforms, calling them a primary form of “tax avoidance” by corporations.

A spokeswoman for the coalition, Rebekah Gewirtz, called on policymakers to accept the tax code reforms without tying them to an excise tax cut, and then to invest the $400 million in “services and programs critical to our economic future,” according to a statement.

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