When Governor Charlie Baker first proposed that sales taxes in Massachusetts be suspended this summer — not, as in years past, for two days but for two months — my reaction was lukewarm. Rather than eliminate the sales tax for one-sixth of the year, I reasoned, why not reduce the sales tax rate by one-sixth — from 6.25 percent to 5.2 percent — and leave it there for good?
On Beacon Hill, however, permanent tax cuts are about as popular as cholera. While a year-round cut in the sales tax rate might be ideal, the Legislature would never consider it.
But why should it balk at Baker’s far more restrained bill to suspend sales taxes just for August and September?
After all, it’s not like the government has been starved of revenue. The government is gorged with revenue. The state’s tax collections for the just-ended 2021 fiscal year far outstripped projections. When June’s numbers are finalized, the Treasury will have banked at least $4 billion more than it had anticipated. The COVID-19 pandemic had been expected to stretch the government’s resources to the breaking point, but the opposite happened: Beacon Hill was inundated with cash. Instead of drawing down the so-called rainy day fund, the state has been adding to it. It now totals $4.4 billion, higher than it was before the pandemic.
Baker’s sales-tax moratorium would leave in consumers’ hands about $900 million that would otherwise go to the Treasury. That isn’t a trivial sum, but compared with the tsunami of tax receipts flooding the Commonwealth’s accounts, it’s not much more than a rounding error. The Legislature just passed a 2022 budget totaling $48.1 billion — that is 53 times the cost of the governor’s proposed sales-tax holiday. The foregone revenue would not diminish any spending in the massive new budget; under Baker’s bill, the tax holiday would be paid for out of the unexpected and unspent 2021 surplus.
Yet Democratic lawmakers and their allies instantly declared their opposition.
Senate President Karen Spilka told reporters that it was “sufficient” to give taxpayers a two-day break from the sales levy; two months was out of the question because “there’s a lot of need in the state.” Michael Rodrigues, the Senate Ways and Means chair, derided Baker’s proposal as “a short-term political gimmick.” The heads of the state’s big teachers unions — Merrie Najimy of the Massachusetts Teachers Association and Beth Kontos of AFT Massachusetts — called for more government spending on education and transportation, not on a “billion-dollar giveaway.”
To repeat: Baker isn’t proposing to reduce state spending. He isn’t suggesting that the entire surplus be turned over to taxpayers. He is calling only to let them keep a modest slice of it by relieving them from paying sales taxes for a while. But to Beacon Hill’s liberals, that is a “gimmick” and a “giveaway.” To them, it is axiomatic that whatever taxpayers might choose to do with their own money is unimportant. Only the state can be trusted to spend those dollars wisely and well.
Yet when it was a question of more money in their pockets, legislators raised no objections. In January, the salaries of Bay State legislators went up by thousands of dollars as not one, not two, but three separate pay raises kicked in. Spilka’s total compensation jumped to nearly $178,500 — a $9,000 hike. It didn’t occur to her to object on the grounds that “there’s a lot of need in the state.”
Over the course of the past 15 months, with the tacit approval of the Legislature, countless Massachusetts retail vendors, restaurants, and other companies were forced into a months-long revenue “holiday,” shut down by emergency orders in which they had no say. The number of small businesses open in the state plunged by 37 percent between January and December; small business revenue dropped by 44 percent.
A two-month reprieve from sales taxes won’t undo all the distress caused by Massachusetts’ pandemic restrictions. But it will help. And it’s only fair that state government, which was unexpectedly enriched by billions in surging tax revenue, allow some of that revenue to flow back to the people. Massachusetts politicians will spend more money this year than they have ever spent before. The sky won’t fall if they let their constituents hang on to a little more cash as well.