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:
- 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.
- 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.
- 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.
- 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.
- 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.