Survey: Employers Weighing Moves, Smaller Office Footprints

On November 2, NAIOP joined leading business groups and chambers of commerce in presenting a framework to legislative leaders on how to approach the state’s fiscal challenges in order to position the state for long-term growth.  The pandemic caused an unprecedented economic decline in terms of its scope and sudden onslaught.  The uniqueness of this crisis requires a cautionary approach to policymaking to ensure there are no unintended consequences or long-term impediments to growth.  The only path to a sustainable recovery is to create a climate for job creation and economic opportunity for all. NAIOP will continue to work closely with other business groups and legislative leaders to advance economic development in Massachusetts. Below, please see accompanying media coverage.

Coverage Written By: Colin A. Young | This article was originally published in the State House News on November 5, 2020.

It has never been easier for businesses and jobs to flee Massachusetts in droves and the House and Senate should think long and hard about that possibility before considering new or higher taxes on companies, some of the most influential industry groups this week warned Democratic leaders.

A giant chunk of the Massachusetts business community sent a letter Monday to House Speaker Robert DeLeo and Senate President Karen Spilka reminding them that “barriers to exit for Massachusetts employers and employees has never been lower” given the way the COVID-19 pandemic has fundamentally changed work for millions of people, and that the fragile economy “requires a go-slow approach to new taxes on business.”

The letter was sent as the House was preparing to release its fiscal year 2021 budget for debate next week. The House budget does not call for higher taxes.

Raise Up Massachusetts and other advocates have called on the Legislature to address looming budget wounds by increasing taxes levied against corporations, annual household income over $1 million and investment profits — a plan Raise Up said has “overwhelming support” among Massachusetts voters but that the business groups said could imperil the tenuous recovery from the spring’s COVID-19 shockwave.

“Employers of all sizes, across the Commonwealth, are wary of the fragile economy, growing and crippling cost pressures, and the very real impacts of remote work on both employee and employer behavior. In this environment of great uncertainty, significant changes to tax policy will exacerbate these considerations and slow the recovery that we are collectively working so hard to achieve,” the groups, including Associated Industries of Massachusetts, Mass. Taxpayers Foundation, Mass. Retailers Association, Mass. High Technology Council, Worcester Regional Chamber of Commerce and more than a dozen others, wrote.

The group’s letter does not explicitly say the organizations strictly oppose any and all tax increases, but calls raising taxes at this point “akin to shooting at a moving target with the potential for dramatic long term impacts for the Massachusetts economy.” The groups have a powerful ally in Gov. Charlie Baker, who has said raising taxes doesn’t “seem like the right thing to do.” And while some lawmakers back higher taxes, the Democrats who run both chambers have not been vocally advocating this year for tax increases.

House Ways and Means Chairman Aaron Michlewitz said Thursday that the House budget does not include any “broad-based” or “targeted” tax increase to balance out spending.

“We didn’t have any broad-based tax increases in this budget,” Michlewitz told reporters. “I think we tried to create a budget that addressed the immediate needs that we see are important during this COVID world that we’re living in, but also didn’t burden forever our constituents in this difficult time.”

Michlewitz, however, did not rule out revisiting tax increases in fiscal year 2022, planning for which will begin as soon as the budget for fiscal year 2021 is complete.

“It was something that we obviously considered but being able to do these one-time revenue fixes allowed us to get through this fiscal year. We’ll have to see where we go in FY 22 because we’re not out of the woods just by getting through FY21, that’s for sure,” Michlewitz said.

While tax receipts have yet to falter, the Baker administration and House leaders are budgeting for fiscal 2021 with the expectation that state tax revenues will fall by about $2 billion compared to fiscal 2020, due to impacts of the COVID-19 pandemic. The governor and House leaders are planning to increase spending in fiscal 2021 largely by relying heavily on one-time revenue sources like federal aid and state reserves.

The governor and House leaders are budgeting based on the expectation that fiscal 2021 tax collections will total $27.592 billion, a 6.8 percent reduction from fiscal year 2020. Senate leaders have yet to outline their budget plans.

Asked whether he would veto tax hikes should be they be embraced by the Legislature, Baker said last month, “I would, yeah.”

In the letter, the business organizations said the Massachusetts Competitive Partnership surveyed 100 employers and found that 60 are “considering moving or allowing for more work to be done remotely out-of-state” and 54 are “considering reducing their overall office footprint in Massachusetts” as a result of the pandemic.

“The ability of employers and employees to locate anywhere makes them more sensitive to costs of living and doing business. Remote working could lead to greater job loss, and a slower recovery with implications for the state’s future competitiveness,” the groups wrote. “The barriers to exit for Massachusetts employers and employees has never been lower.”

Lawmakers should also keep in mind the increasing costs that many business owners face, the groups wrote in the letter, like an impending spike in unemployment insurance costs, rising health care premiums, the new state paid family and medical leave benefit program, costs related to the pandemic and protective equipment, and a rising minimum wage. Some of the business groups that signed onto the letter supported the so-called Grand Bargain, a multi-faceted 2018 law that set a schedule for increases in the minimum wage and the establishment of a paid leave program as part of a broader compromise.

A business with 50 full-time workers earning minimum wage — $12.75 an hour now, but rising to $13.50 as of Jan. 1, 2021 — can expect to see its operating costs increase by $142,670 in 2021 as a result of the minimum wage hike, and projected UI and health care costs, the groups said.

As the Baker administration and Legislature were working to get a handle on the budget picture last month, a handful of advocates called for the state to increase certain taxes to raise additional revenue that will help sustain state programs and services through the pandemic and recession.

“When private spending falls during a recession … cutting public spending only prolongs and deepens the recession,” Marie-Frances Rivera, president of the Massachusetts Budget and Policy Center, said. She argued that Massachusetts should instead raise taxes on “people who have benefited from the economic growth that we’ve seen, wealthy individuals, [and] corporations” as a way to raise money for state programs or services that “really get money flowing through our local economies.”

Raise Up said in September that the results of a survey showed that most people in Massachusetts want the state to maintain or increase spending on public education and health care, and they want businesses and the wealthy to chip in more to offset the devastating financial impact of the COVID-19 pandemic.

[Matt Murphy contributed reporting]

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