Sales tax increase may kill instead of cure
By G. Michael Dobbs
Okay, here s a question for you: how will the increase in the state s sales tax affect you?
The increase from five to 6.25 percent approved by the Senate will place Massachusetts in the position of having one of the highest sales taxes in the nation. According to the Boston Globe only eight states have higher rates.
Here s what the Beacon Hill Institute (BHI) had to say. It s a think tank at Suffolk University. According to its report on the sales tax increase, A proposal to increase the state sales tax by 25 percent would destroy approximately 12,000 jobs and discourage nearly $51 million in business investment.
Using its trademark State Tax Modeling Program (STAMP), BHI found that the average person would lose approximately $457 per year in wages.
The institute also pointed out that the increase in the sales tax would not result in expected revenues. The actual increase, given the dynamic effects, would be $649 million, not $900 million.
The sales tax would continue to be regressive with the increase falling disproportionately on low income earners. A 20 percent increase would represent 0.51 percent of the household earning less than $10,000 while only 0.26 percent of the income of a household earning more than $70,000.
If that s right, the sales tax news is pretty grim.
In New England, Connecticut has a six percent tax, Rhode Island, seven percent, Maine, five percent, Vermont, six percent and New Hampshire, none. There have been fears that those Massachusetts residents close to New Hampshire will do their shopping there.
New York has a four percent rate but counties and cities can add to that and it can go much higher.
Will residents of Rhode Island and New York who cross the border for lower prices stop coming?
Will you drive to New Hampshire to shop? The Wal-Mart in Hinsdale is right across the river from Brattleboro, Vt., and only an hour away. Would it make sense to spend the gas and time to go there to stock up?
It doesn t for me, but it might for you.
I think that relatively few folks in Western Massachusetts will be going over the border to do their shopping. The real issue is whether or not consumer spending will decrease here because of the additional tax. A $10 item normally would have a fifty cent toll. Now it will be 62.5 cents. I m sure the state would round up to 63 cents.
The Senate s action will also allow the state to tax alcohol and to allow cities and towns to have their own meal and hotel tax. I don t mind the alcohol provision and I ll be curious to see if area mayors and city councils are willing to impose a local meals tax.
In all of this media coverage I ve yet to see someone -- other than our beleaguered governor -- talk about reforms. Did I miss the discussion when the issue of raising the sales tax came up?
I ve said it before and I ll say it again: no matter how competitive we are with the daily paper, I have no interest in seeing them fold. A letter from their advertising director to The Republican s advertisers released on May 5 described how the paper will replace its broadsheet editions with a tabloid format on Mondays and Saturdays.
I imagine they will look like their Wednesday local editions that are designed to compete with the newspapers published by this company and those by Turley Publications.
Although I don t blame the folks at The Republican for spinning this change as historic, anyone in this industry reading the letter would recognize this is one step away from canceling those editions and cease being a daily.
Daily papers have not done themselves any favor by cutting content people want " local news " in favor of more articles from wire services or syndicates. It should be noted " again " that television and radio are also suffering from economic woes as well. They just don t like to talk about it as much.
What appears to be working in mass media is fulfilling the public s desire for knowing what is going on in their own town and area. Local news production actually costs money, though, because you do have to hire people.
So allow me to make a modified wish of good luck to my colleagues at The Republican.
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