Carlozzi: Are Massachusetts lawmakers serious about competing?

It seems evident that Governor Maura Healey recognizes Massachusetts is at an inflection point and must act to prevent a mass exodus of residents from leaving the Commonwealth and heading to lower-cost states. This is undoubtedly why her first major legislative package was a tax reform bill designed to help make living and working in Massachusetts more affordable. But once state legislators are done putting their stamp on tax relief, will it be enough to stop the hemorrhaging and keep residents and businesses, along with their tax dollars, in the Bay State?

From a small business perspective, there is not enough meaningful relief in the Legislature’s version of the tax package to effectively move the needle on competitiveness.

Gov. Healey proposed raising the exemption for the onerous estate tax to $3 million, but the House and Senate lowered it to $2 million. Therefore, instead of being worst among the handful of states that still levy an estate tax, Massachusetts will be third worst – take that Oregon and Rhode Island! Making matters worse, the Senate opted to include in the long-awaited tax reform bill a tax increase for married couples subjected to the newly imposed 4% income tax surcharge. When it comes to over-taxation, these are hardly great strides towards improving small business competitiveness.

Indeed, Massachusetts’ Main Street businesses face an ever-increasing number of challenges following the pandemic. Anecdotally, we’ve all spent more time in store checkout lines or sat longer at a restaurant waiting for our food because businesses are short-staffed. In fact, the May 2023 National Federation of Independent Business Small Business Optimism Index shows 44% of small business owners reporting positions they cannot fill. Even when employers attempt to hire for a job opening, 89% find no, or too few qualified applicants. Now, factor in prolonged inflation and supply chain disruptions, and the last thing small businesses need are additional hurdles caused by the policies emanating from Beacon Hill.

The cost of doing business here is already too high compared to other states. Massachusetts was ranked worst in the nation for unemployment insurance taxes, something all employers pay. This problem only became more pronounced when other states used billions of dollars in federal aid to cover the cost of layoffs resulting from state mandated shutdowns and Massachusetts only allocated a fraction of what was required. Now, employers are charged with repaying $2.7 billion in COVID assessments on top of their UI taxes. Even scarier is the prospect that business owners may be on the hook to refund another $2.5 billion in UI funds to the federal government due to a billing error the state made during the pandemic.

Further, the cost of hiring and retaining employees is also elevated compared to other states. Massachusetts has one of the highest state minimum wages in the nation at $15 per hour. Legislation was filed this year to elevate that base wage by 33%  to a whopping $20 per hour. And when energy bills skyrocketed for Massachusetts residents this past winter, they shot up for small businesses as well. Businesses require affordable energy to run machinery and heat or cool facilities in order to compete with parts of the nation that enjoy far lower energy expenses. Offering affordable health insurance coverage is also a longtime challenge for small businesses who experience some of the highest expenses in the nation. Smaller employers and their workers continue to be at a disadvantage with limited options, annual premium hikes, and higher deductibles.

So, with all of these challenges and disadvantages, what are the solutions being presented by lawmakers to actually make the state more competitive, strengthen the economy, and encourage job creation? Sadly, few. What we instead witness are energy policies that result in higher utility bills, healthcare proposals that never address rising premiums for small businesses, tax relief that falls short of substantive reforms, and labor mandates that make it more expensive to run a small business. And in the end, those costs are all passed along to Massachusetts consumers, making the state all the more unaffordable. If legislators are honestly serious about making Massachusetts a real contender against lower cost states, it’s time to consider broad-based tax relief, eliminate impediments to operating a business, and tackle energy and healthcare affordability.

Christopher Carlozzi is state director of the National Federation of Independent Business