Last year, in the heat of Round 1 of the Romney budget battles, Associated Industries of Massachusetts, the business lobbying group, commissioned Ernst & Young to answer the question that always gets asked in tough times: Is business paying its fair share? The answer, considering the study was bought and paid for by the business community, was as predictable as the question itself: "The level of Massachusetts state and local taxes on businesses is . . . high and rising," the big accounting firm found.
Now with Round 2 of the Romney budget battles just getting started on Beacon Hill, Ernst & Young is out with a new 50-state report on taxes paid by businesses. According to Ernst, business paid 43 percent of all taxes collected by state and local governments last year, including 65 percent of the increases in all such taxes over the last three years. The report is pretty much what you would expect.
But for those of us interested in the little picture versus the big picture (i.e., what it means for us) the best reading is in the noodgey charts in the back of Ernst's new survey. The bottom line: By every measure Ernst uses to rank taxes, Massachusetts business is being treated kindly -- and in most cases very kindly -- compared to business elsewhere.
Here is how Massachusetts ranks nationally, using Ernst's four measures of business taxation:
* Business share of all taxes: Number 42.
* Taxes per employee: Number 27.
* Business taxes as a share of economic activity (the sum of payments to labor and capital and indirect business taxes paid by business): Number 46.
* Business taxes as a share of capital income (corporate profits adjusted for inventories, government subsidies, and other items): Number 38.
If the terminology gets hard to follow, the trend is not. Three of four of the key measures Ernst uses put Massachusetts in the bottom third of the states on business taxation. Massachusetts businesses paid 38 percent of all state and local taxes last year, according to Ernst & Young. As noted, that compares with 43 percent nationwide.
Massachusetts will always be an expensive place to do business. But our old image as Taxachusetts belongs in a museum beside the textile loom and the minicomputer. "I think the tax climate is pretty good," says AIM president Richard Lord, an admission that tells you something all by itself. "We are not lobbying for additional tax incentives. Most of our efforts are aimed at preserving what we have."
Which is what everyone is doing. With hospitals, schools, the city, and towns still facing cuts, it is fair enough to look hard at how we tax business. Last year Governor Mitt Romney surprised the business community by moving to close a scandalous tax loophole that benefited the banks, a change that cost them $140 million in back taxes. Romney's new budget includes about $70 million in new revenues by closing loopholes, or making changes in tax policy, depending on your point of view. Romney and the Legislature have an obligation to look even harder for other opportunities.
And business needs to appreciate how things have changed. Don't count on it, though. Yesterday lobbyists were out sounding the alarm about provisions in the Romney budget that could cost the private sector $7.5 million for the uncompensated care pool and $10.5 million for the childhood immunization program. "They are not backbreakers in isolation, but they contribute to the rising cost of business in Massachusetts that threatens our competitiveness," said Cort Boulanger, a vice president of the Massachusetts High Technology Council.
Things are tough all over.
Steve Bailey is a Globe columnist. He can be reached at 617-929-2902 or at bailey@globe.com.