Issue link: https://nebusinessmedia.uberflip.com/i/542288
www.wbjournal.com July 20, 2015 • Worcester Business Journal 21 That message is mixed. Here's why: FAS 109. This is a loss for business, specifically multinational corporations, now that the legislature voted to eliminate it. But it's really not a loss. FAS 109 provides a business tax deduction, based on a financial accounting standard that requires that the effects of income taxes resulting from transactions occurring in the current and preceding years be reported on a company's financial statements for current and future years, according to the state revenue department. It includes accounting for certain deferred tax liabilities and assets to reflect the future tax consequences of events that have been recognized in a corporation's financial statements or tax returns. But here's the rub: FAS 109 has not been i m p l e m e n t e d i n Massachusetts. It was born within a larger corporate- tax-raising reform in 2008 and would have allowed write-offs over seven years to minimize the impact on state tax revenues. But lean budget years after 2008 meant lawmakers never let the deduction bear fruit. Nonetheless, business groups this month urged Baker to let FAS 109 stay. Yet, since it was only on the books and never carried out, it's a battle that business will likely lose. The governor himself has indicated he was willing to cut it loose. Film tax credit. Baker had sought the elimination of this nine-year-old incentive — a 25-percent payroll tax credit to help lure the movie business — to help fund expansion of an income tax credit for low-income residents. But House leaders wanted to maintain the credit, and a lobbying campaign by film-industry workers and related professionals helped reinforced that position. Keeping it could also be a boost for the state's tourism industry. Sales tax holiday. The holiday itself has become an annual event. Unfortunately, so have the legislature's deliberations leading up to it. Just before press deadline, lawmakers were moving toward approval of this year's holiday: the weekend of Aug. 15 and 16, but not until after the budget dance and a push earlier this month from the state's retailers. The 6.25-percent sales tax ranks within the top 20 among the states. With such a relatively high rate, there's no need to manufacture a little political suspense for the sake of retailers and consumers when potential extra business is on the line for stores, along with savings for shoppers. Reforming the MBTA. This is not an issue that directly impacts business as much as it sends a message that the state's leaders can come to an agreement and demonstrate flexibility on fiscal policy. The MBTA, following a harsh winter stretch that halted service and left commuters scrambling to find ways to get to work, will fall under a new control board and be freed from the restrictions of the Pacheco law that regulates privatization. The law, officially called the Taxpayer Protection Act, has been cited as an obstacle to government efficiency. The state budget suspends the T from the law for three years. The agency's annual budget is about $2 billion, and the system needs a capital infusion to upgrade its equipment. The T's problems provided Baker with his first test of the management skills that, in part, won him election. Success in reforming the T has the potential to change the business sector's perception of Massachusetts. The commonwealth is in better shape than most states after a crippling recession. With business growing in Central Massachusetts and elsewhere, a key challenge for the state is to stay on a growth track. Agreements on fiscal policy can go a long way toward reversing the commonly held perception that Massachusetts is anti-business. n State budget 'dance' sends mixed message to business E D I T O R I A L The Worcester Business Journal welcomes letters to the editor and commentary submissions. Please send submissions to Rick Saia, editor, at rsaia@wbjournal.com. Letters can also be faxed to 508-755-8860. D oes business have any responsibility in addressing social issues or needs? The American economist and Nobel laureate Milton Friedman penned a famous 1970 New York Times magazine editorial in which he asserted: "There is one and only one social responsibility of business – to use its resources and engage in activities to increase its profits." Today, this is often referred to as the "Scrooge argument"; that is, "the business of business is business" and social issues should only be the purview of the government. But in the mid-1990s, scholars and business leaders began to consider a new business ethic, suggesting an implicit "social contract" between the profit sector and society with obligations, opportunities and shared advantages for each. Pure corporate greed began to give way to "corporate social responsibility" and the concept of "shared value." (Think of the value Hanover Insurance has brought to Worcester through the emerging arts and culture sector). Today, this concept has been further developed by Nobel Peace Prize laureate Muhammad Yunus of Bangladesh, who has argued for a "new kind of capitalism that serves humanity's most pressing needs." His concept of "social business" emphasizes the power of capitalism to do more than reward shareholders. Dannon, BASF, Adidas, Newman's Own and other global for-profit entities are increasingly recognizing that social concerns are not merely tangential to business but fundamentally connected to it. "Social business" portends an evolution (some might say a creative disruption) to our long-held notion of capitalism as driven purely by self- interest. Yunus envisions an enlightened form of capitalism that rebalances the scale of equity between those at the top and bottom of the economic pyramid. He calls for profit-making businesses to establish socially driven subsidiaries to which all dividends and profits are directed to solving community needs. My work as a social entrepreneur, nonprofit administrator and college educator has taken me to places in America and developing countries where abject poverty is a way of life. I've seen and been touched by the smell of poverty so rooted in a community as not to be describable back in the comfort of my home community: Worcester. More recently, through the efforts of two of my former Clark University students originally from Bangladesh, I met with Muhammad Yunus to discuss the evolving role of business in all societies around the world and – with the support of the administration and trustees of Becker College – bring the first "Yunus Social Business Centre" in the U.S. to Becker. The intent of this initiative, in partnership with Seven Hills Foundation, will be to explore how we can engage business, government and all citizens toward advancing a form of capitalism that lifts all people in our society, in particular the least advantaged. As Silicon Valley in California is often thought of as the epicenter of high tech and Boston the hub of higher education and health care, why not Central Massachusetts as the birthplace for American capitalism's reinvention, and the development of social business? n David A. Jordan is president of Seven Hills Foundation, based in Worcester. He is also the Social Entrepreneur in Residence at Clark University and Professor of Practice of Social Innovation at Becker College, where he is also a trustee. Make room for 'social business' BY DAVID A. JORDAN Special to the Worcester Business Journal V I E W P O I N T David A. Jordan T he annual budget dance between the legislature and the governor is, for the most part, over. Lawmakers approved a $38.1 billion budget that they sent to Gov. Charlie Baker for his signature, maybe even a veto here and there. All that's left to do is the cleanup — and the assessment of how the fiscal year 2016 spending plan will impact everyone, including the business sector. But the bigger issue, as far as the state's fiscal policy is concerned, is the message that's telegraphed to the business community while everyone's engaged in the dance. The bigger issue, as far as the state's fiscal policy is concerned, is the message that's telegraphed to the business community while everyone's engaged in the dance.