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As vote looms, concern raised over tax holiday

Legislators, budget watchdogs point to impacts of forgone revenue from sales

A worker made his way through a mob of shoppers at the Ikea in Stoughton during the 2007 summer sales tax holiday.John Tlumacki/Globe Staff/File/Boston Globe

With votes looming this week, a growing chorus of legislators and budget watchdogs from across the political spectrum is voicing sharp skepticism about the summer sales tax holiday, a decadelong Massachusetts tradition popular with consumers.

Some officials worry that the weekend reprieve from the 6.25 percent tax diverts millions from state coffers during tight budget times, depriving the state of money that could be used for everything from education to fighting the opioid overdose epidemic. And they are concerned that the holiday simply alters when consumers spend money, instead of fueling the economy more broadly by increasing spending overall.

But don’t put off thoughts of buying that new couch just yet.


At this point, the increase in opposition appears insufficient to kill the tax holiday this year — planned for Aug. 15 and 16, pending lawmakers’ approval — but its fate in future years is increasingly uncertain.

Killing the tax holiday is politically risky. Many retailers loudly support it, saying it is good for consumers, businesses, and jobs, and legislators are not keen to yank a holiday seen as backed by constituents.

In interviews, Senate President Stanley C. Rosenberg and his House counterpart, Speaker Robert A. DeLeo, did not express particularly strong enthusiasm for the sales tax holiday, but the Democrats acknowledged the political reality that anchors it.

“I’ve always been cool to it,” Rosenberg said of the holiday with a laugh, “but I’ve lined up every year and voted for it.”

During last year’s holiday, which applied to almost all retail items priced $2,500 or less, the state lost out on $25 million of sales tax revenue, according to an estimate from the Department of Revenue. That’s $25 million consumers saved.

DeLeo said he is concerned about how the sales tax holiday affects the state’s bottom line.

“Having said that,” the powerful legislator continued, “it has become so popular with the consumers and especially the retailers as well, who contact their local reps and senators, that I think it’s somewhat difficult to try to put the brakes to it.” He also said it can be a boon to retailers and shoppers.


Rosenberg sounded a note of discomfort with what is often last-minute legislating that, he said, makes it seem as if elected officials have no choice because everybody is expecting the sales tax holiday.

He said it would be productive for the Legislature to have a fuller conversation “about if you’re going to invest $25 million of taxpayer money to help people, what’s the best way to do it?”

Rosenberg added he can think of other ways, including permanent tax cuts, “that could help people as much, if not more.”

One oft-cited study opponents of the holiday point to: a scathing 2014 report from the Tax Foundation, a nonpartisan think tank based in Washington, which found sales tax holidays across the country shift spending rather than boost it, create tax code complexity, and aren’t a good tool to provide relief to low-income people.

“Sales tax holidays do not promote economic growth or significantly increase consumer purchases,” the report said. Seventeen states had holidays in 2014, according to the foundation.

Massachusetts rolled out its first holiday in 2004, though then it was one day, instead of two. It has since happened every year except 2009, when the economy was struggling.


The Department of Revenue estimated that the amount of forgone sales tax revenue was about $25 million last year, up from nearly $15 million in 2008.

But Jon B. Hurst, president of the Retailers Association of Massachusetts, said the boost to the local economy far outweighs the revenue the state forgoes.

Hurst pointed to a Beacon Hill Institute study commissioned by the Retailers Association that found a sales tax holiday this year would bring up to $231 million in retail sales to the state and create the equivalent of up to 860 new full-time jobs.

He said the holiday is key for retailers competing with shops in New Hampshire, which doesn’t have a sales tax, and the Internet. And he said in the age of smartphone instant shopping gratification, the idea that the holiday just shifts spending doesn’t really hold water.

Hurst also made a political point.

“Everybody who runs for reelection every other November says they are pro-small business and pro-Main Street,” he said, adding that support for the sales tax holiday is “the best indicator of whether people support their small businesses and support their consumers.”

But Senator William N. Brownsberger, a Belmont Democrat who has voted for the holiday, plans to vote against it this year, he said. On his website, he tells constituents that “[h]olidays are festive and I am not by nature a grinch.” But he’s reassessing his support.

Senator Robert L. Hedlund, a Weymouth Republican, called it “a complete gimmick.”

“We pick people’s pockets all year long, and now we throw a little scrap back and try to present ourselves as heroes,” he said, arguing that the temporary holiday doesn’t reform tax policy to make Massachusetts more competitive.


Beacon Hill budget watchdogs chimed in with varying degrees of skepticism.

Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation, said from a budgetary standpoint the sales tax holiday “is getting increasingly more difficult to justify, given the [state’s] structural deficit” and funding levels remaining essentially static for most parts of state government.

Leaders of others watchdogs, across the political spectrum, also poured cold water on sales tax holiday boosterism.

In 2014, a bill that contained the sales tax holiday was enacted unanimously in the Senate and won approval 144-9 in the House.

Representative Alan Silvia, a Fall River Democrat, was one of the majority to vote for it, he said essentially by rote.

But, he explained, the more he thinks about what $25 million could be spent on, from early education to fighting the opioid overdose crisis, the more he is opposed to it.

Silvia noted the tough economic times Massachusetts was in when the first holiday was voted on.

“It was supposed to be a one-time deal,” he said. “Part of the problem in Massachusetts: We do these one-time things, then they last forever and ever, amen.”

A sign on Route 1 in Saugus, Mass. advertised the sales tax holiday in 2010. Erik Jacobs for the Boston Globe/File/Globe Freelance

Joshua Miller can be reached at joshua.miller@globe.com. Follow him on Twitter @jm_bos.