NOT GILTI: State Lawmakers Cool to Business Tax Hike – For Now

Earlier this year, labor activists at Raise Up Massachusetts accused businesses of not paying
their “fair share” of taxes in our state. They have pushed the state legislature to increase the
amount of foreign “global intangible low-taxed income” – or GILTI – that is subject to our taxes.
If enacted, this would drive up the cost of doing business in the Commonwealth at a time when
a growing share of businesses are already considering relocation due to high costs.

For now, the Legislature’s verdict appears to be: Not GILTI.

The proposal to increase the GILTI tax did not move forward on Beacon Hill in advance of a key
deadline this week. But this doesn’t mean it’s fully off the table, and there’s no guarantee similar proposals won’t crop up in the future to threaten our state’s competitiveness.

That’s why MOA is hosting an expert-led webinar on December 11 to break down exactly what
GILTI is and how it would impact Massachusetts.

Our panel includes:

• Moderator: Larry Edelman, Business Columnist, The Boston Globe
• Panelist: Jim Stergios, Executive Director, Pioneer Institute
• Panelist: John Cantalupo, Partner, Tax Services, Ernst & Young
• Panelist: Karl Frieden, VP & General Counsel, Council on State Taxation

For more information on the webinar, email newsletter@massopportunity.org.

Looking to Learn More?

Let’s start by defining GILTI. Massachusetts has one of the highest business tax rates in the
country, and currently imposes that tax rate on 5% of certain foreign earnings for businesses
operating here. Those foreign earnings are called “global intangible low-taxed income,” or
“GILTI.”

The proposal to raise the amount of GILTI income that gets taxed would penalize companies
operating in Massachusetts based on a faulty claim about what’s “fair.” In fact, a recent Ernst &
Young cost-benefit analysis of state business taxes shows Massachusetts’ businesses pay up
to 2.7 times more in taxes than they see from tax-funded government benefits.

While Massachusetts companies paid nearly $24 billion in business taxes in Fiscal Year 2023, they received as little as $8.9 billion worth of state spending that benefits them. That means Massachusetts companies are actually paying well beyond their share for government benefits.

Why is the proposed GILTI tax bad for Massachusetts?

The Bay State’s existing high taxes already make it difficult to operate here and reduce
Massachusetts’ competitiveness for business investment.

• Greater tax liability to Massachusetts increases the complexity and cost of compliance for any company looking to do business here, and will drive investment to other states that don’t impose GILTI taxes.
• Experts at the Council on State Taxation (COST) warn the proposal would put American companies at a “competitive disadvantage” compared to foreign-based companies doing business in Massachusetts.
• Many of our competitor states, including California, Florida, and North Carolina, do not tax businesses this way, meaning they are lower-cost and lower-complexity states to set up shop.
• Voters don’t want to raise taxes to bolster the state’s revenue, and instead nearly 70% want the state to reduce its spending.

As Massachusetts businesses raise concerns about the viability of our state’s business climate, it’s important to consider solutions that make it easier to operate here, not more expensive and complicated.