A.I.M. to taxation committee: tax incentives = jobs.

BOSTON--(BUSINESS WIRE)--March 22, 1995--"Measures to establish tax incentives for Massachusetts employers generally and the threatened defense industry in particular will help to retain and expand job opportunities for Massachusetts residents," said John Gould, president of Associated Industries of Massachusetts, today at a public hearing conducted by the Legislature's Joint Committee on Taxation.

A.I.M. is an employer association of 3,400 Massachusetts companies.

In his opening statement, Gould said, "In terms of tax policy, it makes sense for Massachusetts to offer business tax incentives, even at some immediate cost, in order to gain personal tax revenues by fostering investments in jobs and productivity." If the state had retained the 230,000 manufacturing jobs it has lost since 1984, he pointed out; they would have generated another $9 billion of payroll, with $300 to $400 million in state revenue coming from the personal income tax alone.

Although the Massachusetts economy has improved, Gould noted that the state has recouped only about 40 percent of the jobs lost over the past five years and is still down almost 300,000 jobs since the end of 1988. "Therefore," he said, "Massachusetts must design tax policies that not only gather revenue today, but promote the maintenance and creation of well-paying jobs that will ensure the Commonwealth's future." For example, during the past three the state of Ohio has witnessed 1,958 new plants built or major expansion plans announced as compared to 33 for Massachusetts. "They have beaten us by a ratio of 60 to 1 by using a tax strategy which is probably better suited to our economy than theirs," said Gould.

Gould specifically asked the Taxation Committee to consider several tax incentives filed by A.I.M., including legislation to:

o make the state's 3 percent Investment Tax Credit permanent;

o exempt mandated pollution control and safety equipment used in

manufacturing from the state's 5 percent sales tax;

o lift the sales tax on energy used in manufacturing;

o provide a 10 percent tax credit for job training expenses to

encourage employers to help their employees become more productive.

Stressing the need for these incentives, Gould said, "We can compete in a world economy only to the extent that we have highly skilled people using state of the art equipment to make advanced products, yet today the state ranks near the bottom among the 50 states in all measures of capital investments."

Regarding the Raytheon Co.'s defense industry initiatives, Gould said that several of the proposals on taxation and other issues submitted by Raytheon have long been advocated by A.I.M. as steps to make all employers more competitive. He urged the committee to weigh carefully the special situation of the defense industry in the state. Gould noted, "In some respects the defense industry clearly requires special treatment. For example, the current extensive research and development tax credit is of little value to them. Second, Raytheon's proposals respond directly to real advantages enjoyed by their head-to-head competitors in other states; and, third Raytheon is only the largest of some 1,000 defense contractors in the state who employ a total of 117,000 people in good-paying jobs."

In conclusion, Gould said he hoped that the committee would give serious consideration not only to simpler, narrower issues such as A.I.M.'s bill to rationalize the definition of manufacturing equipment, but also to broader initiatives such as Raytheon's proposal on apportionment.

"Your support for these measures," Gould said, "will make 1995 a watershed year of bold moves to dramatically improve the Commonwealth's economic climate and thereby retain and expand our employment base."

CONTACT: A.I.M., Boston

Brian Gilmore, 617/262-1180 (days)

617/646-0573 (evenings)