Tuesday, February 20, 2007

Stop the hysteria over taxes


Got that out of your system? Good.

For the last week, critics in the government, media, and the public have been instinctively screeching about Governor Patrick's plan to allow cities and towns to impose a meal tax of up to 2% in an effort to raise revenues and slow the rise of local property taxes. I support the Governor's plan.

The governor's plan allows municipalities who are facing budget crunches to levy a meal tax as a way to raise revenues. It makes sense. Cities and towns will be able to raise revenues from out-of-town visitors. And the tax is voluntary, in the sense that if one goes to the grocery store and cooks at home, he or she won't have to pay the tax.

There have been a number of arguments against the plan, but one of them is particularly mindless. Not surprisingly, an editorial in today's Sentinel and Enterprise makes the argument:

A meals tax might be fine in Boston, where millions of tourists come each year, but it could be a business killer elsewhere.

Pricing and value are very important to these fledgling businesses.

They don't need an extra tax to drive customers out of town.

If you don't think about it, the argument makes sense. If there is a local meal tax in Leominster and there is not one in Clinton and Fitchburg, diners will choose to eat in cities without the extra tax.

But if you think about it--and I mean think about it at all--this argument is not grounded in fact.

Let me use myself as an example. Sunday night, Michelle and I ordered out at our local Pizzeria for grinders, chips and soda. It cost us around $20.00. I drove a mile to the restaurant and a mile back. If there had been a local meal tax, it would have been about 40 cents. Now, lets say the meal tax "drives me out of town" and into Clinton to pick up the sandwiches. I will have driven about 15 miles round trip to save the 40 cents. Which means that I would have spent around $1.10 in gas to save the 40 cents in taxes. Would I do that? Not a chance.

Or take my commute every morning. Occasionally, I stop at Dunkin Donuts for a coffee and two donut combo, which costs me $2.99. There is only one Dunks along my commute to Metro West, and it's in Leominster. Will I be willing to lengthen my commute and wind my way through Clinton to save myself the six cents in taxes on those days I want breakfast? Of course not.

In fact, on a $100 restaurant bill, the additional meal tax will only be $2.00. Which essentially means that you'll save no money unless your extra round trip is less than it would take to burn a gallon of gas.

Only those who have no critical thinking skills (like people who will drive 20 miles out of their way to save ten cents on a gallon of gas) or are so anti-tax that they are willing to spend more on gas than they are taxes would make a decision like that.

Cities and towns who increasingly face budget crunches only have a few options available to them: cut services, collect more aid from the state, or raise property taxes. The governor's plan gives cities and towns another way to address their shortfalls.

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