Worcester Business Journal

4 Worcester Business Journal • February 1, 2016 www.wbjournal.com T wo main narratives have emerged around the proposed millionaire's tax in Massachusetts. Those in favor of the petition essentially say there are nearly 20,000 fat-cat millionaires that could be taxed to the tune of $2 bil- lion a year with relatively little harm to them or the economy. The other side argues this is taking money directly out of the economy and could drive innova- tive people to less tax-happy states. Lost in the clutter of the debate has been the nuance that many of these mil- lionaires are the owners of relatively small businesses. The tax could have a detrimental effect not only on these people's personal bottom line, but that of their business, according to Massachusetts business groups. What is it? The millionaire's tax is an initiative petition that would establish a 4-per- cent surtax on incomes more than $1 million. More than 90,000 certified sig- natures were turned in supporting the petition. Proponents, such as Raise Up Massachusetts, say the measure would improve equality and provide needed funds for education and transportation. The Massachusetts Department of Revenue estimates the proposed surtax would affect 19,500 filers, raising about $1.9 billion in revenue. The measure could appear on the 2018 ballot pending a vote by 50 members of state legislature. How are small firms impacted? These millionaire's aren't just people with a high-paying job. Nearly 80 per- cent of those making a million or more are reporting income from a business such as a sole proprietorship or a part- nership, said Bill Vernon, the Massachusetts director for the National Federation for Small Businesses. While this category does not cover most small business owners -- the aver- age NFIB member has five employees and grosses around $450,000 a year -- it does include small manufacturers and financial services firms, he said. Many of these people pay taxes at the indi- vidual rate on their business' profits because it is simpler than setting up a corporation. Vernon stopped short of saying the tax would drive small businesses to other states. He acknowledged many small businesses are not prime candi- dates for relocation. However, it's a matter of simple math: if business own- ers have less money, there will be fewer investments in the business. "It will discourage the creation of new jobs and the creation of new small businesses and the expansion of current small businesses," Vernon said. He said simply having $2 billion pulled out of the state economy would hurt small businesses' revenue. What happens now? If you're a small business, not a whole lot will happen until 2018 when the measure might appear on the bal- lot. If this measure were to progress, Vernon expects more small businesses would move to incorporations. NFIB and the Associated Industries of Massachusetts have come out against the measure, while a group of university economists support it. Whichever side you're on, there is a lot of lobbying left to do before this issue is put to bed. n Hopkinton's VMware to lay off 800; new CFO named The cloud storage company VMware has announced 800 employees will be laid off and a new chief financial officer will come in as its parent company, EMC Corporation of Hopkinton, prepares for an impending merger with Dell. The announcements were made in a financial report for VMware. The lay- offs are expected to cost the company $55-$65 million in the first half of 2016, but will result in savings moving for- ward, according to the company. Those savings will be invested in field, techni- cal and support resources. The company also announced that Jonathan Chadwick, VMware's chief financial officer, chief operating officer and executive vice president, has decid- ed to leave VMware and will instead expand his advisory roles, working with a number of companies as a non- executive board member. Current EMC CFO Zane Rowe will take on the CFO role beginning in March of this year. IT company sets roots in Worcester Worcester information-technology service provider Cinch IT Inc. is close to buying its own building, which the company said marks a commitment to doing business in the city for years to come. The IT provider, which started on Shrewsbury Street 11 years ago, said it expects to move into its new office at 945 West Boylston St. this April, about two months after its $200,000 purchase of the building is expected to close. The 1,200 square foot office space has a sizeable conference room, which the company plans to use to host seminars for clients on search engine optimiza- tion, online review management, and any other IT-related subjects they might be interested in. Worcester County among best places to own a home A new study ranked Worcester County second in the state in terms of owning a home, highlighting the affordability of owning versus renting in the area. The annual study from SmartAsset compares average rent and home prices in counties across the U.S. to find the places where buying makes the most sense. Worcester was ranked second behind Bristol County, thanks to the relatively low price of the average monthly mort- gage payment at $808, compared to the average monthly rent of $1,347. The study also found that it took just over three years to reach breakeven on a home purchase in the county. This compares favorably both with Middlesex County, which was eighth on the list. It takes 4.2 years to reach a breakev- en point on a home purchase there, and the average mortgage is $1,405, the study found. Whiskey conference comes to Westborough The largest whiskey event in New England will be held in Westborough this February, with thousands anticipat- ed to attend a gathering dedicated to the many iterations of the venerable liquor. The 11th annual "Go Whisk(e)y" Weekend will take place from Feb. 24 to 28. The event attracts experts and hob- byists from all over the nation, accord- ing to Julio's Liquors, where the event is held. Tastings and seminars will be held throughout the week. On hand will be spirits critic F. Paul Pacult and David Blackmore, global master brand ambas- sador for Glenmorangie and Ardbeg. Worcester display firm opens media division The Worcester trade show exhibit creator and mill work company BlueHive announced in January it will branch out and offer social media ser- vices. The BlueHive Group, which is known for its physical handiwork, decided to branch out into the digital landscape as a means to provide a one- stop marketing business for its custom- ers. BlueHive Media Management, as it will be called, will offer services such as establishment and daily management of social media accounts and produc- tion of videos and photos. Hiring a social media manager can be a large investment for a company, according to Amadeus Finlay, BlueHive's director of media and public relations, with the position costing companies up to $70,000 a year. However, having a digital presence is important, he said. MetroWest Medical Center partners with Beth Israel MetroWest Medical Center has signed a clinical affiliation agreement with Boston powerhouse hospital Beth Israel Deaconess Medical Center that will strengthen the clinical services at MetroWest hospitals. "This affiliation will bring substan- tial benefits to patients and families in the western suburbs. MetroWest's two community hospitals will continue to provide quality care close to home with the capacity of serving patients with more complex needs at our academic medical center in Boston," Kevin Tabb, MD, President and CEO of BIDMC said in a statement. REGIONAL BRIEFS Verbatim "Millennials were like nomads who never wanted to buy a home, kept renting and moving from job to job. They realize they are making good money and don't want to waste it with a rental as they see home values going up." Melvin Vieira, a sales consultant at RE/MAX Destiny in Jamaica Plain, said when discuss- ing the 2016 housing market. >> "We want to ensure that this growth is well distributed across the state, and with that in mind we are actively encouraging companies located outside of Greater Boston to apply" Travis McCready, president and CEO of the Massachusetts Life Sciences Center about job creation tax incentives. >> "[This] is where (co-founder) Jon and I spent an inordinate amount of time inside a container ... and now the real thing is here." Freight Farms co-founder and Clark University alum Brad McNamara, who placed one of his farms at Clark. >> In Review CENTRALMASS >> Continued on next page Millionaire's tax could hit small(ish) businesses hard BY SAM BONACCI Worcester Business Journal Digital Editor

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