Local officials react to proposed two-month sales tax holiday

June 28, 2021 | G. Michael Dobbs
news@thereminder.com

Photo Credit: State House News Service

WESTERN MASSACHUSETTS – The reaction from members of the Western Massachusetts delegation to the governor’s proposal to establish a sales tax holiday for the months of August and September has brought some critical reactions.

Governor Charlie Baker announced through a press release that he has filed the legislation to establish the holiday.

“A two-month sales tax holiday will provide a boost to Massachusetts’ taxpayers and Main Street economies as we continue to recover from COVID-19,” said  Baker in the release. “Massachusetts’ economic recovery is off to a good start, but it’s crucial that the commonwealth takes action now to spur more economic activity in communities and support taxpayers. Thanks to stronger than expected tax revenues, the commonwealth has managed to grow the Rainy Day Fund to a balance higher than it was at the beginning of the pandemic, and we can also afford to return these tax dollars to our residents and small businesses.”

According to the statement, “State tax revenues for Fiscal Year 2021 (FY21) continue to significantly exceed projections, with revenues to date 14.9 percent above benchmark. Strong revenues across the board have allowed the commonwealth to grow the size of the Stabilization Fund and be poised to end the fiscal year with a significant surplus for the FY21 budget. As a result, the Administration is proposing to support the commonwealth’s taxpayers and downtown economies by designating the entire months of August and September as sales tax-free.”

If enacted the same rules apply to the two-month holiday that have applied to the weekend tax holiday. Massachusetts law prohibits the tax break on “telecommunications services, tobacco products subject to the excise imposed by chapter 64C, marijuana or marijuana products subject to chapter 94G, alcoholic beverages, as defined in section 1 of chapter 138, gas, steam, electricity, motor vehicles, motorboats, meals or a single item the price of which is more than $2,500.”

Retailers of Massachusetts Association President Jon Hurst, said, “A two month sales tax holiday is a smart, exciting, and progressive economic incentive that will benefit our small businesses and our consumers just when they need it. Consumers represent 70 percent of our economy, and it is important that we encourage them to invest in our Main Streets, small businesses and communities.  And for our lower income families, this tax cut is all about temporarily suspending the most regressive tax on the books, just as their children are heading back to school.  Retailers and small businesses across the commonwealth thank the Baker-Polito Administration in proposing this important economic growth incentive, and urge the Legislature to pass it into law.”

Local members of the Legislature feel otherwise.

State Sen. Eric Lesser told Reminder Publishing, “This proposal would cost $900 million and do almost nothing to help our local retailers. Now that COVID is ending, demand is at record levels. Our local businesses need more workers and better infrastructure, not political gimmicks. Extra funds should be used to reduce class sizes, repair crumbling roads and bridges, improve broadband Internet, or use to pay down debt.”

State Rep. Lindsay Sabadosa noted, “While tax-free holidays are popular and thus are great for politicians who want to bolster their popularity, they do not promote economic growth or significantly increase consumer purchases, as confirmed by a 2017 Federal Reserve study. Sales tax holidays create tax code compliance, labor allocation, and inventory management issues for businesses and, while sales tax is regressive, sales tax holiday’s benefits are even more so since those with the greatest buying power benefit the most. If the governor wants to discuss real proposals that add progressivity to our tax system, benefitting small businesses and working families, there are many in the Legislature that would be delighted to have those conversations with him, but this proposal is a gimmick at best.”

State Rep. Angelo J. Puppolo, Jr., said, “While it’s early in the discussion, I certainly think it merits a full review. The Legislature has been a solid supporter of the annual sales tax holiday weekend, and continues to do so. I’m curious as to why the Administration didn’t go farther and suggest a meals tax holiday as well because that industry has also been hit very hard and patrons of restaurants could use a break too. So if we are considering going down this two month road let’s look at everything post-COVID.”

State Sen. John Velis commented, “The COVID-19 pandemic has absolutely devastated so many businesses in our communities, with many having to close their doors. As our commonwealth’s economy continues to recover, it is imperative that we support our local businesses however we can.

“A longer sales tax holiday is something that we should absolutely consider, but it is important that the outcome matches up with the investment. A two-day holiday is too short to really have an impact, but a two-month holiday, which would cost the state $900 million, could be too long.

“From our roads to our bridges to our schools, there are so many issues that we need to invest in. These are tangible projects to improve the quality of life in our communities that might get neglected if we forgo almost a billion dollars in revenue. As we consider the length of the holiday, we need to be sure we are helping our small businesses without hurting our communities.”

State Rep. Michael Finn said, “I am not in favor of Governor Bakers tax break proposal, I actually think there are many other options that excess revenues could be used for. Some examples include the still unsettled Unemployment Trust Fund Solvency issues, which impact employers, employees, and ultimately consumers.  Support for our Disproportionate Share Hospitals who continue to need our support while providing critical care to all corners of our state. Lastly fully funding the student opportunity act.

“I found his proposal, being introduced shortly after a disagreement with the Legislature over how federal monies should be spent to be gimmicky.”

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