Accountable USA - Massachusetts

In the decades after World War II, Massachusetts built a substantial high-tech sector – concentrated outside Boston along Route 128 – without major spending on subsidies.  As other states later sought to pirate both high-tech and financial services companies, Massachusetts responded by adopting special giveaways for biotech and other sectors.

The costs of those subsidies exacerbated fiscal problems seeded in the 1990s, when manufacturing interests led by military contractor Raytheon pressured the state to adopt single sales factor (SSF).  Fidelity Investments also signaled it would take jobs out of the state unless the state did the same for mutual fund companies.  SSF is a formula for calculating corporate income tax that drastically reduces taxes for companies that have a large presence in the SSF state but sell mostly in other states.  Despite the tax “relief,” a number of large companies reduced employment in the state rather than engaging in the job expansion that SSF proponents had predicted: Fidelity’s workforce in Massachusetts dropped by 25%, or 4,000 jobs, between 2006 and 2010.

Some of the most significant subsidy deals in recent years have involved biotech firms, such as a Bristol-Myers Squibb manufacturing facility in 2006 that benefited from $64 million in infrastructure improvements and Investment Tax Credits (see below).  The Investment Tax Credit program costs the state more than $70 million annually.  The state spent $48 million to land Shire Pharmaceuticals in another large biotech deal in 2008 (see below).

Other major state programs we examined for our disclosure report include the film tax credit, a research tax credit, and the Life Sciences Investment Tax Credit.

The Economic Development Incentive Program (EDIP) has undergone serious scrutiny in recent years following reports that it subsidized retail development and construction that was already underway.  Of the 1,400 EDIP applications received by the Economic Assistance Coordinating Council between 1994 and 2010, only one was rejected.  This program was recently uncoupled from the three percent Investment Tax Credit, which was given automatically to all EDIP recipients.

The lack of scrutiny of existing programs and the enactment of lavish new subsidies prompted groups such as MASSPIRG, Common Cause Massachusetts and One Massachusetts to advocate for transparency of tax expenditures.  Thanks to these organizations, the state legislature passed a law in 2010 mandating the creation of a webpage to disclose recipient names of certain types of business tax credits beginning in 2012.  This reporting, which began in June 2012, covers refundable tax credits (credits for which any amount exceeding the recipient’s tax liability is issued as a cash grant) and salable and transferable tax credits (credits that may be sold or transferred to other business entities when their value exceeds the original recipient’s tax liability).

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Economic Development Incentive Program

credits against corporate excise taxes plus tax increment financing or property tax abatements for companies in target areas. (Disclosure began after our report was published.)

$2.6 million (2014)
26/100
35/100
50/100

Film Tax Credit

credits against corporate excise tax issued to film productions for payroll and non-payroll production expenditures. (Disclosure began after our report was published.)

$78.0 million (2014)
23/100
10/100
38/100

Investment Tax Credit

a 3% investment tax credit that can be applied to corporate excise tax liability

$74.7 million (2014)
0/100
10/100
40/100

Life Sciences Investment Tax Credit

refundable 10% investment tax credits for growing biotechnology businesses that are Certified Life Science Companies. (Disclosure began after our report was published.)

$16.9 million (2014)
30/100
35/100
53/100

Research Tax Credit

corporate excise tax credits based on increases in R&D expenditures

$174.2 million (2014)
0/100
10/100
38/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Bristol-Myers Squibb (2006)

Massachusetts economic development officials celebrated in 2006 when they outbid three other states for Bristol-Myers Squibb's first biopharmaceutical plant. Sited on the former Fort Devens military base, the plant was to produce a treatment for rheumatoid arthritis called Orencia. In exchange for a promised $650 million capital investment and 350 initial jobs (to increase to 550), the Massachusetts Development Finance Agency (MassDevelopment) issued bonds to fund $34 million in infrastructure improvements to the site. The company should also qualify for state corporate income tax credits valued at 5 percent of its capital investment, or approximately $32 million. Officials of the three towns with jurisdiction over the Fort Devens site ceded negotiating authority to MassDevelopment and banded together to expedite local approvals to the company’s plans in a mere 58 days. The company entered into a project labor agreement for the construction of the facility, which is expected to be in full operation by 2011. (Key sources)

Shire Pharmaceuticals (2008)

In 2008 Shire Pharmaceuticals chose Massachusetts over several other states for a $394 million manufacturing complex in the Boston suburb of Lexington.  It was offered a state and local subsidy package worth $48 million. Shire promised to create 680 jobs with an estimated average salary of $100,000. The British-owned drug company had first come to Massachusetts in 2005, when it acquired the Cambridge-based biotech company Transkaryotic Therapies. The Lexington deal was boosted by the state legislature’s 2008 enactment of a ten-year, $1 billion Life Sciences Tax Incentive Program, which includes nine different types of subsidies. About $40 million of the package offered to Shire was to come from this program. The town of Lexington granted Shire another $8.1 million for site improvements by issuing 20-year tax increment financing (TIF) bonds repayable through the growth in property tax receipts. The facility opened in May 2010. (Key sources)

Evergreen Solar (2007)

Evergreen Solar had been operating in Massachusetts for a decade when in April 2007 the state offered the company a $44 million package of grants and loans to support a doubling of its operations. Evergreen agreed to build a new $150 million plant on state-owned land in Westborough (near Worcester) that was expected to create up to 375 new jobs. The package included $13 million in grants from the Massachusetts Technology Collaborative (MTC) Renewable Energy Trust, the state’s Workforce Training Fund and other sources. Some $17 million in low-cost loans came from MassDevelopment, MTC and Citizen’s Bank. The company later changed the location of the plant to the former military installation at Devens; the subsidy package went with it. In April 2008, before the plant even opened, the company announced an expansion of the Devens facility.

The following year, however, Evergreen shocked the state by announcing that it would transfer production of solar panels to a plant in China while keeping solar wafer and cell production in Devens. State officials expressed disappointment at the move, but no effort was made to recoup the subsidies given to the company, which had grown to $58 million after MassDevelopment, which manages the Devens industrial park, offered a tax increment financing deal to Evergreen. In January 2011 the company announced that it would shift the remainder of the Devens operation to China. The state pursued a clawback but was able to recoup only about $3 million of the $21 million that had been paid out to to Evergreen. In August 2011 Evergreen filed for Chapter 11 bankruptcy protection. (Key sources)

Walmart in Massachusetts

  • Good Jobs First found no instances of Wal-Mart subsidies in Massachusetts, but given the absence of comprehensive centralized data, it is still possible that deals have quietly occurred.
  • At least 1 Wal-Mart location in Massachusetts has challenged its property tax assessment.
  • Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.

For more information, see the Massachusetts page of Wal-Mart Subsidy Watch.