Voting for a sales tax increase (29 Responses)

Last night, the House voted to increase the sales tax from 5.0% to 6.25%.   I voted with the majority in the 108 to 51 vote.

This increase will raise approximately $900 million.   Of this total, approximately $300 million will go to fund Big Dig debt currently being carried by the Massachusetts Turnpike Authority and the MBTA.  This will reduce pressures for fare and toll increases, but will leave major capital needs in our transportation system unaddressed.   Approximately $200 million will be allocated to increase unrestricted general local aid so that no community sustains more than a 10% cut in general local aid from FY2009.  This will benefit all of my communities — Arlington, Belmont and Cambridge.  I will report the exact numbers as they become available.   Approximately $400 million will remain available for appropriation by the House to restore a portion of the $1.8 billion of deep program cuts in the House budget.

Here are a few key observations:

  1. Even with the tax increase, the House budget at $28 billion will include over $1 billion in  program cuts, including many program eliminations.  Valuable services will be lost, even with the tax increase.
  2. The $900 million sales tax increase roughly equates to the $900 million proposed by the Governor in a combined gas, meals and other tax increases  — see the Governor’s Budget and the Governor’s Transportation Plan.
  3. After the sales tax increase, if adopted by the Senate, the state’s sales tax rate will be in the middle among states nationwide; the overall state-local tax burden (total state-local taxes as a share of income) will also be roughly in the middle.
  4. Politically, within the House, the sales tax increase went down the middle.  Many members advocated a stronger package that would go further to cover the state’s needs, especially transporation; many other members advocated no new taxes at all.  I was in the former group, but I feel that the outcome fairly reflects the views of the House.
  5. The Senate has yet to take up the budget and is likely to cut revenue projections based on the economic downturn.  So, whatever comes out of the House, the Senate may make further cuts or recommend additional tax rate increases.

The vote involved some interesting cross-currents.  Despite his own early advocacy of various tax increases, the Governor threatened to veto the increase if reforms were not enacted first.   Indeed, many of us would have preferred to take the sales tax vote after the final votes on the conference committe reports for transportation, ethics and pension reform.  But in practice, this was impossible.  If we delayed voting on revenues, we could not pass the budget and then the Senate would not be able to take it up — the result would have been a budget coming in after July 1.  The budget and the various reform measures will arrive on the Governor’s desk at more less the same time.

The veto threat forced the speaker to spend the afternoon carefully counting votes to assure he would be able to override the Governor’s veto.   Among the holdouts, in addition to all of the Republicans, were many of the Democrats on the losing end of the recent speaker’s fight.

See the State House News story at the Belmont Citizen Herald.

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  1. Dave says:

    Increasing the sales tax is only driving more buiness out of the state, in order to generate more buiness we need to try to keep people from driving to NH to buy there product. This may initialy generate dollars but how much will be lost in the long run?

    • Will says:

      Thanks for commenting! Regarding busines going out of the state,the experience in prior tax increase votes is that buying patterns change temporarily, but people basically keep shopping where they shop. The economists do consider these issues in the revenue estimates.

      Will B.

  2. Mark says:

    Will — Reform before revenue: How much savings do we have from reforms? How does this compare with the increase in the proposed sales tax increase?

  3. Ed says:

    I agree with Dave,I am on a fixed income and the only thing goin up is my taxes.I have to keep cuttibg and the state just keeps spending.Really notthe way to go for good government.

  4. Ray Glazier says:

    I’ve seen no discussion of the fact that any sales tax is a regressive tax that inordinately burdens lower income people. Our flat rate state income tax also over burdens lower income people, unlike the more graduated, progressive federal income tax. Of course, both income tax systems are full of loopholes to the advantage of higher income persons.
    There must be a better way to balance the budget than raising the sales tax.

  5. Jane says:

    Isn’t the sales tax kind of a regressive way to increase revenue? I agree that more revenue is sorely needed to fund critical programs in the safety net for those at the bottom of the income scale who are barely holding on right now, if they are at all. As I understand it, ESL classes are being cut, for example, despite the fact that these are exactly the resources needed by the growing population of low income Latino high school students who are dropping out of school at a 50% level because of difficulties learning English, and are then joining gangs in the cities, leading only to poor outcomes and greater expenses for tax payers on many levels, from Emergency room care after street violence to prison costs, family dysfunction, DYS services, etc. Why can’t some of us who have more than we need agree to raising taxes on the highest income brackets in the state to make the cities we love safer for us all, and help our most vulnerable neighbors in a small way to weather this terrible financial time that is hitting them the hardest?

    • admin says:

      Regarding progressivity, yes. Fair objection to the sales tax. I’ve urged a package that would make the income tax more progresive. See income tax proposal. But anything related to income tax right now is politically DOA. The sales tax seemed to be the least objectionable overall to people.

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