Statewide business groups are gearing up for a new tax battle on Beacon Hill over a proposal that would allow cities and towns to impose their own tax surcharges for local transportation projects.
The proposal would also give municipalities the ability to team up with each other to form new regional taxation districts. Tax increases would need voter approval, via a local referendum in one or multiple communities, before they could take effect. Increases could be imposed on property, sales, auto excise, or lodging taxes.
The Senate leadership included the local ballot language in a transportation bond bill scheduled for debate in the Senate on Thursday.
Proponents say the local vote requirement ensures these surcharges only take effect in places where they are wanted, to raise money for specific projects in those communities.
But critics say these new taxes would hammer small businesses at a time when many are barely able to survive amid the COVID-19 pandemic.
“It’s the last thing these small businesses need at this time,” said Jon Hurst, president of the Retailers Association of Massachusetts. “Many of them are hanging on by a thread.”
The retailers group and the state chapter of the National Federation of Independent Business urged members to lobby for an amendment by Senator Diana DiZoglio that would strip the regional ballot initiative from the Senate transportation bill entirely. DiZoglio, a Democrat from Methuen, also filed an amendment supported by the retailers that would simply remove the sales tax as an option.
In a statement, DiZoglio said she’s concerned about how the local surcharges could hurt small businesses in communities along the border of sales-tax-free New Hampshire. She said she understands the need to generate more revenue, but worries about additional financial hardships.
John Regan, chief executive of Associated Industries of Massachusetts, said the local ballot option has the potential to create a “patchwork of tax policy” across the state. And Jim Rooney, chief executive of the Greater Boston Chamber of Commerce, said the ballot language could exacerbate regional inequities between wealthier communities, where passage of these measures might be more likely, and lower-income communities.
Rooney said he prefers statewide approaches, such as the 5-cent gas tax increase and additional fees on Uber and Lyft rides included in a transportation revenue bill that the House passed in March, before the pandemic hit. The House also passed its version of the transportation bond bill around that time. Neither of those two bills included the local taxation option.
Senate leaders, meanwhile, have indicated they have no plans to pursue statewide tax or fee increases to pay for transportation projects this year. Instead, their focus is on getting a transportation bond bill passed.
Senator Eric Lesser, a Democrat from Longmeadow, said he is championing regional ballot initiatives because outlying regions of the state such as his Western Massachusetts district often get neglected in transportation debates on Beacon Hill.
“The MBTA tends to vacuum all of the oxygen out of the state’s transportation conversation,” Lesser said. “The MBTA urgently needs attention and focus. But the overwhelming majority of the state’s residents are being served by other transportation methods or regional services.”
Lesser envisions a number of possible uses for the money that would be raised: Maybe communities in the Berkshires could band together to fund train service to New York City, or cities and towns in the Pioneer Valley could subsidize more passenger trains along the Connecticut River. Closer to Boston, Lesser suggested communities in the western suburbs might join together for bus rapid transit service.
The Senate has previously approved similar language, but it has never been adopted by the House. Transit advocates remain hopeful the outcome will be different this time, despite the resistance from the business groups.
Chris Dempsey, director of the Transportation for Massachusetts coalition, noted that many mayors, including Martin J. Walsh in Boston, have asked the Legislature for this authority to address their transportation needs. He believes many local chambers of commerce would also welcome the option. Dempsey said his group is supporting a separate amendment that would allow municipalities to adopt a tax on parking fees.
“This regional ballot initiative power is something that many states around the country have,” Dempsey said. “The reason voters like them is because they can actually see the benefit of the projects because they happen in local communities. It’s about empowering municipalities and municipal leaders.”
Lizzi Weyant, director of government affairs for the Metropolitan Area Planning Council, said a local gas tax increase was not included as an option in the Senate bill because separate legislation would be needed to allow municipal authorities to impose their own taxes at the pumps.
Weyant said a recession is good time to fund transportation projects, because such investments would boost an economic recovery.
But Mark Gallagher, vice president at the Massachusetts High Technology Council, said this recession is different, as so many people are forced to work from home to limit the spread of COVID-19. Plus, additional local taxes, Gallagher said, could be one more factor in deterring businesses from investing here. Congestion on roads and trains is no longer the pressing issue it was for Greater Boston just six months ago.
“Everything we thought we knew about congestion, transportation infrastructure needs, and transportation priorities has been flipped on its head by COVID-19,” Gallagher said.