Massachusetts Considers Higher Taxes on Multinational Profits

Skyline of Boston. Courtesy of Wikimedia Commons.

In today’s global economy, big companies often use complicated financial strategies to pay less in taxes. One common method is called profit shifting, where corporations move their profits from places with higher taxes, like the United States, to places with lower taxes, often called tax havens. This lets them reduce how much they owe, even if much of that money was actually earned here.

While this practice is legal, it means states like Massachusetts lose out on money that could go toward important public programs, such as schools, housing, and transportation. Policymakers have been debating how to make sure large corporations pay their fair share without driving businesses out of the state. That’s where two new bills — H.3110 and S.2033 — come in.

These twin bills, filed for the 2025–2026 legislative session, aim to raise about $400 million a year by increasing the state tax on the foreign profits of large corporations. The sponsors, Democratic Rep. Carlos González and Democratic Sen. Jason Lewis, argue that this change would help Massachusetts recover revenue lost through profit shifting and use it to fund essential public services. Critics, however, say the bills could hurt business competitiveness, discourage companies from investing in the state, and make Massachusetts a less appealing place to operate compared to other states.

H.3110/S.2033 is a pair of identical bills proposed in the Massachusetts legislature for the 2025–2026 session, which aim to raise an estimated $400 million in annual revenue by increasing the state tax on the foreign profits of large corporations. The sponsors, Democratic Rep. Carlos González and Democratic Sen. Jason Lewis, argue that the bill would allow Massachusetts to recoup corporate tax revenue now lost to profit shifting (planning strategies to move profits from high-tax countries to low-tax jurisdictions, like tax havens, to reduce their overall tax burden) by multinationals and raise “hundreds of millions” annually for state programs. However, critics also argue that it could also hurt business competitiveness, imposing a massive tax increase on employers, potentially leading to a slowdown in investment and hiring, and making Massachusetts a less attractive place to operate compared to other states. 

Under current Massachusetts law, only 5 percent of foreign profits (Global Intangible Low-Taxed Income, or GILTI) is included in the state’s taxable corporate income. The proposed legislation would raise that inclusion rate to 50 percent.

Advocates such as the Massachusetts Budget and Policy Center (MassBudget) (a non-partisan, non-profit think tank that provides independent research and analysis on Massachusetts state budget, tax, and economic policies) contend that this change would help recapture revenue lost through profit shifting. They argue that “this legislation would allow Massachusetts to collect corporate income tax revenue currently lost to abusive, international profit-shifting by large, multinational corporations” and would generate “hundreds of millions” of dollars annually. 

The bills also don’t allow companies to count their foreign sales when figuring out how much of their income is taxed in Massachusetts. Because of this, critics — including members of the business community and large multinational corporations — argue that the law would unfairly increase taxes on international companies operating in the state. Meanwhile, supporters — such as progressive lawmakers and tax equity advocates — contend that this change would prevent corporations from shifting profits overseas and ensure they pay their fair share of taxes.

Business-oriented organizations have actively opposed H.3110/S.2033. The Council on State Taxation (COST) submitted testimony opposing the bill, arguing it would place U.S. multinationals at a competitive disadvantage relative to foreign multinationals and could raise constitutional issues. The Council On State Taxation wrote that states that “it places U.S. MNCs at a competitive disadvantage relative to foreign-owned MNCs … and is likely unconstitutional, putting at significant risk any revenues raised by the proposed legislation.”

COST and other critics contend that taxing foreign income without accounting for foreign sales breaches the principle of fair tax sharing—the idea that companies should contribute taxes proportionate to where they earn their profits—and may violate the U.S. Commerce Clause. They argue that by disproportionately taxing U.S.-based multinational corporations, the proposed twin bills could be unconstitutional under the Commerce Clause, which prohibits states from enacting laws that unduly burden or discriminate against interstate or international commerce.

Through press briefings with the media, business coalitions (including Associated Industries of Massachusetts, Mass Business Roundtable, Greater Boston Chamber, and Mass Taxpayers Foundation) characterize the bill as “a massive, unprecedented and misguided tax increase” that would worsen the state’s competitiveness. The Boston Globe reports that business groups warn the change “would simply add to the state’s many economic competitiveness woes.” The Mass Opportunity Alliance (MOA) argued that the bills would “make Massachusetts even more of an outlier while exacerbating declining job growth, driving up costs, and pushing taxpayers out of state.”

These groups frame Massachusetts as already economically unappealing due to its high cost of living, elevated corporate tax rates, and expensive business environment compared to nearby states. They argue that additional tax burdens—especially on multinational corporations—would discourage investment, prompt companies to relocate, and further weaken the state’s ability to attract and retain businesses. From their perspective, the proposed tax changes amplify existing structural challenges and make Massachusetts less competitive within both national and global markets.

House Bill H.3110 (introduced in the House) and Senate Bill S.2033 (introduced in the Senate) have been filed and referred to the Joint Committee on Revenue, with a public hearing held in October 2025. 

Overall, the debate over H.3110 and S.2033 highlights the challenge Massachusetts faces in striking the balance between tax fairness and economic competitiveness. Supporters argue that the bills would require large multinational corporations to pay a fairer share of taxes on their foreign profits, generating hundreds of millions of dollars in revenue for essential state programs such as education, housing, and infrastructure. They contend that these additional funds could significantly expand public investments—for example, supporting the construction of affordable housing or improving public transit systems—helping address pressing social needs while reducing inequality.

As lawmakers continue to deliberate, the decision will ultimately reflect the state’s priorities—whether to focus on ensuring corporations contribute more to the public good or to maintain a business climate that attracts and retains companies. Regardless of the outcome, the discussion surrounding these bills raises important questions about how Massachusetts can promote both fiscal responsibility and long-term economic growth in an increasingly global economy.