In crisis there is opportunity — or so it is said.
The governor has proposed a so-called accelerated sales tax before. But this time, it seems, legislators are listening.
It could be because the current state budget shortfall is pushing both the Baker administration and the House Ways and Means Committee to try almost anything to raise revenue. As the House opens debate on its version of the state budget Tuesday, it looks ready to embrace this source of quick cash.
“I think it’s one of those ‘break glass in case of emergency’ kind of conversations, and this is obviously a fiscal emergency in terms of what we’re dealing with, so we think that it’s the appropriate year to be doing this,” House Ways and Means chairman Aaron Michlewitz said at a news conference to announce the budget last week.
This isn’t a tax hike. The law would simply require large businesses to turn over the sales, meals, and room-occupancy taxes they collect more quickly. (Small businesses that do less than $2.4 million in sales per year would not be affected; an estimated 5 percent of businesses in the Commonwealth would.) And that would mean more cash for the state this fiscal year, in the midst of a crisis when it is sorely needed.
House budgeters estimate the switch will bring in $267 million that otherwise wouldn’t be available — money that will be needed to help fund some of the well-chosen priorities in their budget, like more money for the Rental Assistance for Families in Transition program that helps those unable to pay their rent during these tough times ($33 million more than the governor proposed). The House budget also provides more money for food security programs, addiction services, legal assistance, and services to the homeless, including homeless youth and people with mental illness. It could also offer a potential way to fund the governor’s proposed small-business aid program.
The House, which begins formal debate on the budget Tuesday, wisely opted to deal with the contentious issue of sports betting in a separate economic development bill. It’s not that the state couldn’t use the revenue (estimated at some $35 million a year). It’s just that speed is of the essence in getting this budget deal done — and throwing in a bunch of hot-button issues wouldn’t help. That’s something to be kept in mind as the House deals with the 777 proposed budget amendments — yes, you read that right — filed by members.
Of those proposed amendments, one — to provide state protections to reproductive health similar to those currently guaranteed under Roe v. Wade — got an official go-ahead from House Speaker Robert DeLeo in a statement issued by his office Monday. And that ought to be the rare exception because of its urgency and importance to women’s health with a Supreme Court poised to strike down Roe v. Wade.
Meanwhile, the Senate is planning on unveiling its version of the budget Thursday, even as the House is expected to still be debating — extraordinary times call for extraordinary measures.
“Both chambers have worked collaboratively during these difficult times, and we will continue to do so as we finalize a FY21 budget,” Senate Ways and Means chairman Michael Rodrigues said in a statement Monday.
Let’s hope Rodrigues too has seen the light on the accelerated sales tax idea that he disparaged last year as merely “one-time revenue” — unless he has an easier way to “find” $267 million.
This time around, the proposal would only hit those businesses that remit more than $150,000 a year in taxes — in other words, those businesses that do more than $2.4 million in sales a year. Currently, businesses take as long as 50 days to send sales taxes to the state, earning those big-box stores — that were allowed to stay open during the pandemic, let’s not forget — a considerable amount of money in interest, or on “the float.” Under this sales tax provision, large businesses would have to pay taxes collected in the first three weeks of every month in the final week of that month.
As Secretary of Administration and Finance Michael Heffernan told a joint meeting of the Ways and Means Committees last month, the current antiquated system “was designed for the days of paper checks and manual cash registers.”
Of course, the real and lasting reform proposed by the governor, but not part of the House budget, is a permanent system for remitting those taxes directly to the state at the time of the sale. That not only prevents sales tax cheating but also could add in the neighborhood of $700 million a year to the revenue stream.
But clearly, that’s an argument for another day. And with the next fiscal year looking nearly as problematic as this one, it certainly stays on the list of painless ways to help fill the state treasury.
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