Inventory Tax A Barrier To Growth
Hruby
Last month, New Jobs for Massachusetts published a report showing that eliminating Massachusetts' state and local inventory tax could trigger creation of 56,400 new middle-class jobs.
Few people know Massachusetts has an inventory tax. We're one of the last nine states that have one. We estimate that the tax, collected at the local level, generated about $6.2 million during fiscal year 2012.
The inventory tax kills jobs because inventory is mobile. Companies can easily move it to Connecticut, New Hampshire or Rhode Island and pay no tax.
Inventory needs people to pack it, hold it for sale and ship it. So when inventory goes, jobs go with it. The tax causes manufacturers, distributors and retailers to suppress inventory growth.
Eliminating the inventory tax would be an even stronger job-creation engine in Worcester County and the western arc of the Interstate 495 belt, because the area has a higher concentration of manufacturing and distribution than other Massachusetts counties. Framingham-based TJX, for example, is a major national retailer.
The Worcester area is an ideal site to hold inventory. Want to distribute products throughout New England? Ship to Worcester County, break up bulk shipments here, and send smaller lots on to Metro Boston and the entire region.
Are you a high-tech manufacturer in Cambridge or Billerica that wants to sell products to the whole country? Locate your finished inventory near the junction of the Massachusetts Turnpike and Interstate 84 in Sturbridge, Charlton, Spencer, the Brookfields, Oxford or Auburn, then ship south to the Atlantic seaboard and west to the rest of the country.
Want to expand your manufacturing company? Worcester County has plenty of land and low population density, so there's room to grow. Even Worcester proper, urban as it may seem, has one quarter the population density of Somerville.
Worcester is ready to grow, and there are at least six reasons why job growth would accelerate if the Legislature were to eliminate the inventory tax:
1. Growing Massachusetts companies will stop moving their inventory out of state.
2. All Massachusetts companies will stop suppressing the growth of their in-state inventory.
3. Retailers here will hold more stock, manufacturers will store a wider array of finished goods to accelerate order filling, and distributors will concentrate their stock here.
4. Some overseas and out-of-state companies will move inventory to the area.
5. Companies will save the time and money required to calculate, report and pay the tax on their inventory.
6. Entrepreneurs will start specialized storage companies.
New Jobs calculates that the state's 376,000 inventory-handling jobs could grow by 56,400, or 15 percent. Based on its population, Worcester County could see about 12 percent of the new jobs, or about 6,800. But because of the characteristics of the area's economy, repealing the inventory tax could create 10,000 new jobs, helping every town with manufacturing, retailing or distribution businesses.
Worcester County is the natural shipping and stocking center for all of New England. Eliminating the inventory tax would help it capitalize on that advantage and generate thousands of new middle-class jobs.
Michael Hruby is president of New Jobs for Massachusetts of Boxborough, a public policy advocate for rapid employment growth in Massachusetts' private sector.
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