Our police, fire & schools lose close to $150 million/yr because MA thinks subsidizing the paychecks of mutual fund company executives is a higher priority. This one giveaway is 10% of the state's budget deficit this year. The total amount lost each year, when you include all the other desperately needy firms like Raytheon that get this special deal? More than $300 million/year. Remember that, when you start feeling what has been cut in this year's budget.
Curiously enough, Fidelity claims they have no idea how much they're saving!
At the hearing on Beacon Hill, Fidelity President Ronald O'Hanley declined to say exactly how much the Boston financial services giant benefited from a tax change in 1996 for the mutual fund industry. The Department of Revenue estimates the mutual fund industry has saved roughly $1.7 billion since the law was changed 15 years ago, including an estimated $142 million this tax year alone.
One of my favorite parts of this charade is where our elected officials are completely shocked, shocked I say, to find out that these firms heading out the door with the money we've been paying them to stay.
The hearing came just weeks after Fidelity announced plans to close its Marlborough facility and move most of the 1,100 jobs there out of state by the end of 2012. Governor Deval Patrick and other state political leaders complained they were blindsided by the announcement.
Really? They hadn't noticed Fidelity has cut 1/4 of it's Massachusetts workforce in the last 5 years?
Fidelity Investments has reduced its Massachusetts workforce by more than a quarter since 2006, while cutting its overall global employment by nearly 10,000 jobs over the past few years.
No wonder even supporters of so-called job creation tax breaks think this is one tax break that is broken!
So how does it work? According to the Todd Wallack of the Boston Globe,
The law allowed mutual fund companies to calculate their state income tax solely based on the amount of sales in Massachusetts, instead of using a combination of factors that included the size of their payroll.
Initially, companies had to increase their workforce by at least 5 percent for five straight years to take advantage of the tax break — a target Fidelity said it more than exceeded. But starting in 2003, the law applied to all mutual fund companies, regardless of how many jobs they added or lost.
When you consider the size of the budget holes Massachusetts keeps finding itself in, it is hard to understand why we keep handing mutual funds companies a shovel:
The mutual fund industry tax change, adopted in 1996, has proved a boon to companies. The state Department of Revenue estimated the mutual fund industry has saved roughly $1.7 billion over the past 15 years, including an estimated $142 million this tax year alone. Tax officials said they are barred by law from giving figures for Fidelity or any individual company.
Are tax breaks to mutual funds really the best investment we could be making? Personally, I'd rather invest in our cities, towns, and schools!