Thirty-fourth Middlesex District State Rep. Christine Barber.

Taxing ‘GILTI’ would bring in needed revenue for local programs

Representative Christine P. Barber (D-34th Middlesex) of Somerville and Medford recently filed HD5132, An Act to close corporate loopholes and create progressive revenue to fill gaps in the state budget and fund needed programs such as education and public services. 

The COVID-19 public health crisis has caused significant economic challenges, which have directly affected the Massachusetts state budget. The Commonwealth of Massachusetts is predicting a drop in state tax revenue of $4-7 billion in the coming fiscal year, and this decline could drastically impact needed services. Because the state is required to balance its budget each year, dollars for local aid, education funding, health care, and housing assistance are at risk. New revenue is needed to continue funding these necessary programs in our communities, but while families and small businesses are hurting, it is critical that any new revenue collections fall on large and profitable corporations.

Rep. Barber’s HD5132 would raise revenue by closing a significant corporate tax loophole. Some corporations use accounting mechanisms to shift income generated in the United States to offshore subsidiary companies to avoid paying their fair share of taxes. The 2017 federal Tax Cuts and Jobs Act identified this shifted income and taxed a portion of it. Called Global Intangible Low-Taxed Income (GILTI), this provision allows the federal government and states to recoup tax dollars on income that has been shifted offshore. However, Massachusetts still allows businesses to exclude 95% of GILTI income from taxes– allowing these businesses to continue taking advantage of this costly loophole.

HD5132 would close this loophole by “recoupling” the state tax code to the federal GILTI provision, bringing in as much as $400 million in tax revenue for the state from corporations. GILTI only applies to large, multinational, and highly profitable corporations who have offshore holdings– not local businesses.

“Raising new revenue responsibly is a critical tool to support and sustain our recovery,” said Rep. Barber. “Revenue the state would receive from recoupling to the GILTI provision could be used to fund our COVID-19 response, as well as our critical needs including equitable education funding, transportation and local services, making our Commonwealth stronger financially in the long-run.”

“Our future hangs in the balance as we see billions of dollars potentially drained from schools, mass transit, and the public good” said Marie-Frances Rivera, President of the Massachusetts Budget and Policy Center. “Corporations who are profitable during this time have a moral obligation to pay their fair share and invest in our collective future.”

For further information about this bill or to provide input, please visit this link.

— Office of Representative Christine P. Barber