Monday, April 27, 2009

House should reject broad sales tax increase

After all of the discussion all spring about whether or not Massachusetts should raise the gas tax or the meals tax or the hotel tax or a “sin tax,” the legislature unveiled a proposal today to raise the sales tax by 1.25 points to 6.25%. From the AP, via the Telegram & Gazette:
The move would raise the sales tax to 6.25 percent from 5 percent and generate an extra $900 million a year in revenues at a time when the state is struggling with plunging revenues, rising unemployment and a deteriorating transportation infrastructure.

The plan — a copy of which was given to The Associated Press — rejects any other tax increases, including proposals to raise the state income tax rate or apply the sales tax to a range of services that currently are exempt from it.

It also rejects Gov. Deval Patrick's proposals to add 18 cents to the state's current 23.5 cents per gallon gas tax, expand the sales tax to include alcohol, candy and soda, and allow local communities to increase taxes on restaurant meals and hotel rooms.
There was talk last week that such a proposal was in the works, but the details were just leaked last night. Call me a cynic, but I wonder if the sales tax increase was House Speaker Robert DeLeo’s plan all along. For weeks, the state has been debating a handful of proposals put forward by Governor Patrick, none of which included an across-the-board sales tax hike. The governor has been getting hammered. So DeLeo sits back and lets the guv take all of the heat, then unveils his proposal the day before it is going to be voted on, ensuring that it does not face the same level of public debate and scrutiny that Patrick’s plans have been subjected.

I realize that this is the most pie-in-the sky, naïve thing I’ll ever write on this blog, but the legislature should ensure that all amendments are filed 48 or 72 hours before they are to be debated so that the public has the ability to comment. A whole lotta good it’s going to do anyone who might oppose this or any other plan when your state rep isn’t going to be around to get your comment because he or she is in session debating the bill or amendment the same day it is being filed.

While I wouldn’t have proposed exactly the same set of measures that Governor Patrick has, I believe that a revenue plan similar to the governor’s is a better plan than the across-the-board Sales tax hike. My plan would look like this:
  1. Allow cities and towns the local option of raising the meals tax by up to three points, with all of the revenues to be returned to the city or town in which the tax was levied.

  2. In lieu of a gas tax, expand the current sales tax to include gasoline. At a current price of $2.00 gallon, the sales tax on gas would be 7.9 cents (taxed on $1.58, which is the price of gas minus existing taxes). All of the revenues from the sales tax on gas would be earmarked for transportation.

  3. Expand the current sales tax to include all alcohol sales, as well as food and beverages that are packaged for immediate consumption. This is different than the sugar tax in the sense that a two-liter bottle of soda or a box of cookies that you bring home from the grocery would not be taxed, but the 20-oz soda and package of Ho-Hos you pick up at the convenience store would be taxed. This is the same system they use in Rhode Island and it makes all of the sense in the world: if you are buying groceries you don’t get taxed, if you’re buying something to eat immediately you do get taxed, just as you would if you bought food for immediate consumption at a restaurant. I wrote about this a couple of months ago. This part of the plan also differs from the governor in the sense that this revenue would not be earmarked for health care, but would instead go to the general fund.
My plan would increase revenues in the areas the governor has diagnosed, would help pay for transportation debt, and would increase funding to those local communities who wish to participate in the local option meals tax. But it would not raise the tax rate, so sales taxes on big-ticket items such as televisions, automobiles, building supplies, etc. would not increase. It would also give cover to those representatives who are afraid that voting for a string of tax changes would look bad on their record (a ridiculous thought if I’ve ever heard one, but apparently it is real).

Of course, by the time this post is published the legislature may have already passed the 6.25% plan, since there isn’t any real opportunity for the public to weigh in. The good news is that Governor Patrick is apparently going to veto any sales tax hike.

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