Weld Defends Corporate Tax Breaks

BOSTON--Governor William F. Weld '66 and the business community are fighting the perception that a tax break for Massachusetts businesses is a sop to large companies.

Gov. Weld said yesterday that a "single sales factor"--taxing businesses only on their in-state sales--would keep jobs in Massachusetts, attract more to the state and help stabilize the economy.

But House Speaker Charles Flaherty told the Legislature's Taxation Committee that any such nod to the business community must be tied to a promise from companies that they won't move away.

"Guarantees should come with the change," said Flaherty (D-Cambridge), "I think we have the right to know what to expect if we make these changes."

Now, companies pay sales, payroll and property taxes. Revamping that system so they only pay taxes on instate sales would save businesses--and cost the state--about $160 million.

Weld said the lower cost to businesses would allow them to expand and hire more employees, therefore boosting the economy.

"This so called single sales factor would reward those companies that expand their operations in Massachusetts and then export the goods and services that they provide to the universe outside Massachusetts," Weld said.

Weld urged the committee not to water his bill down with a couple of proposals floating around the Statehouse.

One would apply the tax break only to manufacturers. The other, along the lines of Flaherty's position, would require by law that firms benefiting from the tax break must guarantee a certain number of jobs, or force them to reimburse the state if they move away.

The governor said such requirements would amount to "micromanaging the market."

But Flaherty--pointing to the recent proposed mega-merger of Chase Manhattan and Chemical banks, which will result in the loss of 12,000 jobs--said Weld and the Legislature have made great strides in the last five years to make the state's climate more business-friendly.

Instead, businesses ought to "be more responsible," he said.

"We ought not sit here and say 'Yes, yes, yes' as we have over the last five years," Flaherty said.

Earlier this year, defense contractor Raytheon Corp. threatened to move 19,000 jobs to Tennessee, citing the cost of doing business in Massachusetts.

Raytheon Executive Vice President Peter D'Angelo said a move by the firm would devastate the Merrimack Valley because of all the employees there, while the businesses that depend on Raytheon employees also would suffer.

"Raytheon will be able to keep our defense manufacturing in Massachusetts and compete effectively," D'Angelo said. "This has been our goal from the beginning of this process, and since our management and work force initiatives are well under way, this state initiative is now critical to our success and our being able to remain here."

But Laura Barrett, director of the Commonwealth Center for Fiscal Policy, said the new tax formula would have a disastrous impact on the state's economy.

"The revenue loss is too large, the potential gains unlikely to materialize and these proposals represent poor tax policy that distorts the marketplace," she said.