Lowell Sun: Senate OKs Mass sales-tax hike, new alcohol tax

By Matt Murphy
05/20/2009

BOSTON — Senate lawmakers joined their House counterparts last night in signing off on an increase in the sales tax to 6.25 percent, securing a veto-proof majority in both chambers that will generate hundreds of millions in new revenue to restore proposed cuts to government services.

The Senate, however, did not vote to send any of that money back to cities and towns in the form of local aid used to fund police, firefighters, schools and other services.

Instead, the Senate passed a “municipal relief” package worth more than $250 million that will give cities and towns the local option to raise meals and hotel taxes by 2 percent and allow communities to collect property taxes from telecommunications companies on poles, wires

Stacy Connolly, left, and Bernard Joseph Lopes lead a group demonstrating against cuts to health and human service programs at the Statehouse yesterday. AP PHOTO and equipment currently exempt.

The Senate also moved on a quick voice vote, without debate, to lift the sales-tax exemption on alcohol in package stores, netting about $80 million in new revenue that will go to bolster substance-abuse programs on the chopping block this budget season.

“We wanted to give locals the option to raise almost $200 million for themselves,” said Ways and Means Chairman Sen. Steve Panagiotakos, D-Lowell. “We thought we handled the local-aid issue with this.”

Local aid to municipal government has been cut by 30 percent and Chapter 70 aid to schools has been cut by 2 percent in the Senate budget. The House used $205 million from sales-tax revenue to restore local aid in its spending plan.

Senators described the vote to raise taxes a tough decision, but a necessary one to avoid devastating cuts to government services that would hurt the most needy in the state. Critics, however, said the decision will hurt small businesses and drive consumers over the state line to New Hampshire.

Republicans plan to offer their own amendments in the coming days, calling for hiring and wage freezes for all state employees, as well as a repeal of a $110 million tax-credit program for the film industry. Senate Republicans will also propose lowering the sales tax on automobile sales to 3 percent for six months to encourage new-car sales.

Throughout the day, hundreds rallied at the Statehouse to restore funding to programs for the mentally and physically challenged along with public-safety programs, health care and other safety-net programs.

The Senate approved the 25 percent sales-tax increase by a vote of 29 to 10, generating an estimated $633 million in new tax revenue that Senate leaders said they would recommend using to partially restore funding to programs like Shannon grants, used to combat gang violence, college scholarships, summer jobs programs for youth and services for veterans and the disabled. Another $275 million will go to fund transportation infrastructure.

The revenue estimate is lower than the $900 million House leaders projected from the sales tax increase, in part because the plan counts on only 10 months of new revenue to give retailers time to update their systems and adjust to the change.

Only five Democrats, including Sen. Steve Baddour, D-Methuen, and Sen. Susan Tucker, D-Andover, voted against the sales tax.

“The sales tax affects my area disproportionately to other areas in the state,” said Tucker, whose district includes towns like Dracut that border sales-tax-free New Hampshire.

Panagiotakos said the increase still leaves Massachusetts competitive with its neighbors and states around the country, and preserves exemptions on food, clothing under $175, services and prescriptions.

“We had to do something,” he said. “The problem is so large you can’t reform yourself out of it, cut your way out of it or tax your way out of it. I think we found a balanced approach.”

Massachusetts has not raised its sales tax since 1975. The tax will still be lower than New York, where there is an 8.25 percent sales tax, and on par with border states like Vermont and Connecticut, which tax goods at 6.05 percent and 6 percent respectively.

Early in the debate, the Senate overwhelmingly rejected calls to increase the income tax and the gas tax, and similarly shot down a proposal to freeze a scheduled decrease in corporate excise taxes.

Sens. Sonia Chang Diaz, D-Boston, and Jamie Eldridge, D-Acton, offered an amendment to the budget that would have increased the income tax from 5.3 percent to 5.95 percent.

Eldridge called the income-tax hike the “fairest way to address the budget deficit” by raising $1.3 billion in new revenue to plug holes in critical state services.

“It leans more heavily on those who make money, and it does not burden the unemployed compared to the sales tax hike,” Eldridge said.

The amendment was defeated 28-11.

Gov. Deval Patrick has threatened to veto any increase in the sales tax unless the Legislature acts on pension, ethics and transportation reform. Though the sales-tax increase is not his first choice, he said he would support the budget if those reforms are passed before July 1.

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