Loophole remorse; Tax deduction "costs" state $535 million.

COLUMN: IN OUR OPINION

It seems some members of the Legislature are having a bit of buyer's remorse when it comes to last year's corporate tax reform legislation. The new law, which closed certain tax loopholes in order to increase the amount of tax revenue the state could expect from the business sector, also provided for a new deduction for publicly traded companies subject to new combined income reporting requirements. With the recession having bitten deeply into business activity, the effect of the new rules, when all is said and done, means the state stands to "lose" approximately $535 million in revenue over the seven years beginning in 2012.

State Sen. Benjamin B. Downing, D-Pittsfield, chairman of the Senate Committee on Revenue, told the Boston Globe this week that it would be "disingenuous to say that people don't want to revisit some of the decisions we made in that debate."

But "lose" isn't quite the right word here. Tax revenue may be money legally due to the state, but exactly how much tax revenue arrives is always a function of economic conditions. While no one foresaw the severity of the oncoming recession, the corporate tax reform package may not have passed at all without the so-called Financial Accounting Standards No. 109 deduction.

Legislators last year had every opportunity to consider the short-term and long-term impacts of the tax reform, and could easily have asked their number-crunchers to run hypothetical scenarios for a variety of economic conditions.

The business community, meanwhile, having agreed to play by a new set of rules, is entitled to whatever tax deductions those rules provide.

Lawmakers would be well advised to remember that the $535 million they won't be getting their hands on is money that will instead remain available for growth and investment in the business community - and that it is business, not state government, which remains the most vital economic engine of the commonwealth.