Gains and credit in the state’s tax foundation

The $27.4 billion budget headed for the governor’s desk contains outside sections that would attempt to smooth out the state’s year-to-year budget gyrations and reveal whether the hundreds of millions of dollars in tax credits the state issues each year are worth their cost. Both provisions were a direct outgrowth of research done by MassINC and reporting by CommonWealth magazine.

Last year, CommonWealth ran several stories on the wide variety of tax credits popping up in Massachusetts to entice and help build industries as diverse as filmmakers and the life sciences to dairy farmers and restorers of historic buildings. The tax credits in many cases are the equivalent of state grants, but no mechanisms were in place to evaluate their effectiveness in stimulating economic and job growth.

The tax credit provision contained in the House-Senate budget would require state agencies dispensing tax credits to report on an annual basis how many are issued and how many jobs they create. The provision would also require agencies to disclose how much the jobs pay.

The House version of the tax credit disclosure, which mirrored what Gov. Deval Patrick included in his budget, would have mandated reporting the names of companies and individuals receiving tax credits while the Senate version did not. The two branches went along with the Senate approach, shielding the names of tax credit recipients from public view.

The measure also requires a report on each industry's success in meeting the goal of the tax credit, such as the number of brownfields reduced by the brownfield credit, the number of low-income units saved or created under the low-income housing credit, and the impact on dairy output from the dairy farmers' credit.

Lost in the cacophony of the budget's cuts and tax increases is a measure that will do little this year but is a giant step toward stabilizing Massachusetts's reliance on volatile capital gains tax collections. The budget calls for the Department of Revenue to set aside up to 50 percent of any new growth in capital gains tax revenue in the state's "rainy day" fund to offset those years when the collections come in below forecasts.

Meet the Author

Jack Sullivan

Senior Investigative Reporter, CommonWealth

About Jack Sullivan

Jack Sullivan is now retired. A veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

About Jack Sullivan

Jack Sullivan is now retired. A veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

Last year, MassINC issued a policy brief titled "Capital Gains: Avoiding Harm to the State Budget" that showed the state was among the most dependent in the country on capital gains, ranking third in its reliance. The continuing maelstrom hanging over Wall Street and other financial industries and the decrease of nearly $500 million in projected capital gains collections in Massachusetts this year shows how shaky a foundation the budget is on when counting on those revenues to fund state government.

The budget requires the administration and the Legislature to agree on the net collections from the prior year before the 50 percent can be calculated. The measure also calls for 2 percent of the set-aside to be directed to the State Retiree Benefits Trust Fund to help shore up  that over-pressured system.