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For the Massachusetts Economy: It Is All About Being Attractive

Posted on December 1, 2022

CEO’s note – The year 2023 will bring a new Massachusetts governor, a new session of the state Legislature and new challenges for AIM as we continue to represent the interests of Massachusetts employers. What are the overarching objectives of the business community for the new year and which issues will be priorities?

AIM today begins a weekly series of articles outlining the organization’s public-policy agenda for 2023 and beyond. The first installment, written by AIM Executive Vice President of Government Affairs Brooke Thomson, traces the elements that will be required for Massachusetts to maintain a strong and vibrant economy. Subsequent articles will look at issues such as health care, energy and diversity/equity/inclusion.

AIM is your association, so please feel free to contact me at with your comments and suggestions.

By Brooke Thomson

What is going on with the Massachusetts economy as we turn the page on 2022? And what is driving the prolonged shortage of workers that confronts AIM member companies across multiple industries?

Several factors are at play.

Changing demographics have had an enormous impact. As Baby Boomers retire in large numbers and birth rates decline, the growth of the workforce has slowed below the growth rate of jobs. COVID and the resulting Great Resignation saw workers quit their jobs nationally at a record pace of nearly 4 million per month in 2021 and close to 4.5 million per month in 2022. Caregivers have left the workforce in large numbers due the lack of support exacerbated by the pandemic.

And there is still another factor – increased mobility and choice.

Behaviors around workforce are changing. Businesses can now draw talent from throughout the country and hire workers who live in lower-cost states. Businesses themselves can locate and invest elsewhere with greater ease and flexibility than in the past. These decisions by businesses and workers alike about where to locate is often spurred by a desire to reduce costs while retaining a good quality of life.

We used to think about a state’s economic health in terms of competitiveness.  Though previous notions of competitiveness are still relevant, it is important that we engage in a more expansive discussion about what constitutes economic health. This more expansive view includes conversations around whether or not a state is an attractive place to locate, live, pursue a career, raise a family, invest in the community through home ownership and community engagement, and truly feel valued and connected.

Massachusetts in the past drew its economic health and attractiveness from several sources: a large and diverse population, premier academic and health-care institutions, and a strong financial services sector. These elements brought the people, the intellect and the investment necessary to draw talent and maintain a competitive edge over other states.

The predominant challenge that Massachusetts businesses face right now is finding qualified talent to meet demand. The worker shortage has been developing for decades and is now reaching a point of crisis for the economy as companies curtail hours, decline to bid on contracts or close production lines due to lack of employees.

COVID demonstrated that remote work is possible in many sectors. The result is that employers have reconstructed their workplaces and expanded the geographic locations from which they can draw talent.

Massachusetts is the third most expensive state in which to live. The commonwealth ranks 47th when it comes to transportation commute times and 39th in overall transportation quality. Workers, as a result, are making different choices.

Increased costs on businesses, such as the income tax increase passed by voters last month, will cause business owners and employers to make different decisions as well.

We know that the tax increase will have an immediate impact on businesses organized as pass-through entities. These companies – many of them small, family businesses that invest profits back into their businesses to grow and expand – will be punished for their success with higher taxes. They may be unable to buy machinery and equipment and provide competitive pay increases for employees at a time of heightened economic uncertainty. It’s a step in the wrong direction if we seek to make Massachusetts attractive to business.

The new generation of the Massachusetts workforce is struggling. They struggle with college debt. They cannot afford the high cost of housing. They spend hours a day commuting to a job that may or may not continue to give them an opportunity for promotions, increased wages or long-term financial stability.

So, if the Massachusetts economy is changing, what needs to be done to ensure it remains attractive?

Think of the state economy as a dating website. What do businesses and employees find attractive?

Attractiveness from an economic competitiveness perspective means compatibility. Employers and employees are looking for a partner who can meet their needs and support them in the future. Employees want a counterpart that helps them feel committed, that supports their growth and happiness. These workers want to stay and to thrive in that company’s space. Creating a strong economic climate requires stability, and growth and support that leads to a long-term commitment.

The people who work hard at Massachusetts companies need to know they can live comfortably. They need to know that they can obtain meaningful, enjoyable and stable employment. They need to know they are supported with policies and resources to help care for children, aging parents and family members with special needs. They need to know that they are valued and accepted for their differences and diversity. When a state can offer an overall quality of life that is attractive to workers, it will succeed economically.

AIM looks forward to working with the Healey Administration and the Legislature to enact policies that increase the state’s attractiveness to businesses and workers alike. AIM has specific proposals that will provide the support necessary to make  the business climate more attractive:

Support for Subchapter S Corporations and Pass-Through Entities Impacted by Ballot Tax Increase:


  • Change the SALT (State and Local Tax) Deduction Cap tax workaround from revenue positive to revenue neutral
    • In response to the 2017 Tax Cuts and Jobs Act the SALT Deduction (State and Local Tax Deduction) was capped at $10,000;
    • In response, the state allowed S.Corps the option of paying a 5% excise tax on qualified taxable income and in turn deducting that excise paid from its income for federal tax purposes without invoking the SALT cap;
    • However, the S.corp may only apply the credit of 90% against Massachusetts income tax liability (revenue generating);
    • The Legislature should change the law to make the credit apply to 100% against Massachusetts income tax liability (revenue neutral).
  • Reduce individual income tax.
    • 10 states reduced their individual income tax rates this year; Massachusetts should do the same in order to attract and retain workers.

Additionally, AIM supports larger business climate tax-relief proposals that will spur investment and growth. We know such tax relief is often met with skepticism because of the potential impact on revenue for the state. Fortunately, Massachusetts is sitting on billions of dollars in surplus revenue and stimulus money that, if used correctly, could provide real and meaningful support to businesses in the form of state tax relief, as opposed to continued new spending.

Support for Business Climate Tax Relief

  • Pass Governor Baker’s full suite of tax proposals from this past session, including reform of the estate tax;
  • Repeal the sales tax on rolling stock;
  • Maintain the interest expense deductibility;
  • Improve administrative tax laws in the Commonwealth;
  • Use American Rescue Plan Act (ARPA) money to reduce the debt in the unemployment insurance system;
  • Increase spending on workplace training;
  • Reduce housing costs by changing regulations to promote building and increase the housing supply; and
  • Improve transportation by ensuring any revenue gained from the ballot tax increase goes only to transportation and education.

AIM believes that these steps are necessary and practical; and if implemented will make Massachusetts more attractive economically. AIM will continue its mission of representing and advocating for Massachusetts job creators as we navigate into 2023 and beyond. We know that when businesses thrive so does the state and we all share the collective goal of fostering a commonwealth that is strong and provides the highest quality of life for its residents and businesses.