Biz group sees tax, energy, health cost issues on horizon

Photo: Thinkstock
Photo: Thinkstock

STATE HOUSE, BOSTON, AUG. 12, 2014….Taxes, energy policy and health care costs will be among the top issues the next governor and Legislature will have to address to make Massachusetts more competitive, according to an official from a statewide business association.

“We clearly expect with the new administration there will be a full and probably lengthy discussion about tax policy. There will certainly be a conversation about where the Commonwealth is going and where it should go with respect to energy policy. And health care will continue to be a top-level concern,” John Regan, executive vice president of the Associated Industries of Massachusetts, said during a conference call Tuesday to look back on legislative activity before formal sessions ended for the year on July 31.

The next governor will be required, by state law, to come up with a long-term economic development strategy plan – a requirement that was part of a jobs bill the Legislature passed before Gov. Deval Patrick was reelected in 2010, according to Regan.

“The incoming administration will take full advantage of that requirement and do an inclusive planning process, looking at where should be we going in order to be competitive,” Regan told the News Service after the conference call.

Regan compared the future strategy plan to one that Gov. William Weld and Lt. Gov. Paul Cellucci did during their administration in the early 1990s, called “Choosing to Compete.”

“The task was to determine what were the critical items that need to be addressed to make Massachusetts more competitive,” Regan said, adding the Patrick administration did a similar economic plan.

In the next few days, Gov. Patrick is expected to sign the most recent economic development and jobs bill that the Legislature passed amongst the flurry of bills on July 31. The final jobs bill was sent to the governor’s desk a few days later, and Patrick has until August 14 to act.

“We expect there will be an announcement about a bill signing,” Regan said during the conference call. A Patrick aide said the governor planned to act on the jobs bill on Wednesday.

Massachusetts has high electricity costs, Regan said during the call, so AIM was happy when proposed solar energy legislation was pared down.

Lawmakers abandoned a comprehensive overhaul of the system used by the state to facilitate solar energy projects, opting for a simpler lift of a cap on solar production. The bill (S 2214) lifts the cap on public projects from 3 percent to 5 percent of a utility’s total power generation, while the cap for private projects would rise to 4 percent.

The legislation also creates a task force to study the long-term feasibility of net metering in Massachusetts and Gov. Deval Patrick’s stated goal of installing 1,600 megawatts of solar energy by 2020. Patrick signed the bill last week.

“Our objection was principally related to the costs,” Regan said. “Our fear was the additional solar bill called for would have increased electricity rates by $1.5 billion over the next 15 years.”

In the energy bill, the Legislature raised the net metering cap for private solar installations by 1 percent, and public installations by 2 percent. Regan said the cap will likely be bumped up against sometime in 2015.

“We will be back to discuss this to try to design a program that is more cost-effective for our members,” he said.

Health care costs and the effects of the Affordable Care Act on businesses in the state will continue to be a concern, Regan said.

A federal tax on medical device products will also be a major focus next year for business leaders and state policymakers looking to blunt the impact of the tax on Massachusetts device manufacturers, according to AIM officials. As part of the Affordable Care Act, a 2.3 percent excise tax is tacked on to all manufacturers and importers of medical devices.

As part of the fiscal year 2015 budget, lawmakers created a commission to study the federal medical device tax and its effect on Massachusetts companies. Attempts to push Congress to overturn the tax have so far failed, so businesses are looking to state lawmakers to help.

“We think this is another adverse impact, the imposition of the medical device tax on one of the sectors of our economy that is doing quite well, and is quite robust. And we think a tax on that sector is not a wise idea,” Regan said during the conference call. “The commission is being formed to try to figure out if there is a way for Massachusetts, using its own tax policy, if there is a way to offset the negative impacts of the federal tax imposed by the ACA.”

The 19 largest medical device companies in Massachusetts estimate the medical device tax will cost them more than $400 million a year, according to research done by the Pioneer Institute.

“It would hit Massachusetts particularly hard because we have so many medical device companies, and we have the second most employees in the industry,” said Kristin Lepore, vice president of government affairs at AIM. About 25,000 people in the state are employed by medical device companies, she said.

Business executives at medical device firms polled by AIM plan to reduce research and development investments, cut their workforce, or pass costs on to customers to offset the impact of the tax.

“This is definitely a major policy issue for next session,” Lepore said.

While the cost of doing business in Massachusetts is on their minds, a majority of business executives feel the future is rosier in the state. The AIM business confidence index has been increasing in the past several months, and turned slightly positive at the beginning of the 2013-2014 legislative session.
“And now we are solidly in positive territory, and our members have a very good feeling about where they are as companies, where the Commonwealth is as a whole; the hiring picture is brightening,” Regan said.

Copyright 2014 State House News Service

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