A sales-tax hike has the support of cities and towns desperate for cash to save jobs and services. On Tuesday, Gov. Deval Patrick repeated his pledge to veto the hike. He said government reforms must come first.
A sales-tax hike has the support of cities and towns desperate for cash to save jobs and services.
On Tuesday, Gov. Deval Patrick repeated his pledge to veto the hike. He said government reforms must come first.
Those reforms include a municipal relief plan – one that includes local tax options to ease communities’ reliance on property taxes – and ethics, pension and transportation reform bills, which have been debated in the Legislature but not yet sent to Patrick.
Patrick said Tuesday that he is opposed to a higher sales tax, but he believes approving it ahead of reform measures sends the wrong message.
Patrick posted a four-minute video on YouTube explaining his position.
“I am unwilling to wait any longer to change the way we do business in state government,” Patrick, dressed in shirt sleeves and standing in his office, said in the video. “Before we pass new revenue, let’s prove we can bring real change to Beacon Hill.”
Under the House plan passed late Monday night, the sales tax would increase from 5 percent to 6.25 percent, generating an estimated $900 million next fiscal year. Communities would see $200 million of that in local aid, and $275 million would go to transportation. (See how much more money your community stands to receive under the House budget.)
But at the local level, the order of business isn’t necessarily as important as the bottom line, as cities and towns face drastic service and staff reductions.
The Metropolitan Mayors Coalition – which includes Quincy Mayor Thomas Koch and Braintree Mayor Joseph Sullivan – has endorsed the House plan, calling the higher sales tax a “great step toward finding new revenue.”
And the Massachusetts Municipal Association – an advocacy group for cities and towns – wrote to legislators last week to say it “strongly supports” raising the sales tax, as well as local-option meals and hotel taxes.
A spokesman for House Speaker Robert DeLeo has said the House will address municipal reforms in May.
The 5 percent sales tax is the state’s second-largest source of revenue.
The state adopted a general sales tax in 1966; it was one of the last states to do so. Of the 45 states that have a sales tax, Massachusetts ranks last in terms of the revenue it raises as a percentage of personal income, according to the Massachusetts Budget and Policy Center, an independent research organization.
Sales-tax revenue, however, lags behind that of other states because of growth of the service sector and Internet shopping, neither of which are subject to the tax, said Noah Berger, executive director of the Massachusetts Budget and Policy Center.
Berger warned that the revenue from a sales-tax hike would actually decline over time, as the state’s economy continues to change.
“The sales tax is not likely to grow as rapidly as the overall economy,” he said.
Berger said a sales-tax hike is less damaging to the economy and state residents than budget cuts.
That is not an opinion shared by retailers – they fear the impact on their businesses – and Republican legislators. Every House Republican voted against the measure.
The business-backed Massachusetts Taxpayers Foundation has not taken a position on the proposed sales-tax hike, but it released a report saying that a 1 percentage point increase would cost the average taxpayer an extra $122 a year.
In a phone interview Tuesday, state Treasurer Timothy Cahill reiterated his position that a recession is not the time for any tax hikes.
The Quincy Democrat, who is thinking about running for governor in 2010, has repeatedly criticized Patrick for not going far enough with budget cuts.
Cahill described the bare-bones House budget released earlier this month – which cut local aid by 25 percent – as “spot on” and said he was disappointed that it wasn’t debated more before the sales-tax vote.
“It wasn’t painless, but it balanced the budget without taking from the rainy-day fund, and at the time did not includes tax increases,” he said. “I don’t see that as draconian.”
Christy Mihos, a Brockton native who plans to run for governor as a Republican, has said he opposes the sales-tax hike.
Nancy Reardon can be reached at firstname.lastname@example.org.