Our Opinion: Don't cut sales tax, level tax playing field
It is no surprise, therefore, that the Retailers Association of Massachusetts (RAM), the interest group of the state retail industry, is pressing forward with an initiative petition to lower the sales tax from its current rate of 6.25 to five percent (Eagle, September 24). If the petition is successful, it would place the question on the November 2018 ballot.
Another ballot question the RAM is promoting is to institutionalize the popular annual sales tax holiday as a state law, stripping the Legislature of its prerogative to implement it only when the business landscape makes such a move fiscally feasible. While the tax holiday generates a special enthusiasm amid the purchasing public during the heavy end-of-summer pre-school purchasing period, enshrining its existence in both fat times and lean is irresponsible.
On the tax reduction issue, a five percent versus 6.25 percent tax is unlikely to have more than a marginal effect (if any at all) on preventing border-jumpers living in proximity to the Granite State from taking their business north. Cutting the sales tax, however, could deprive the state of a huge chunk of revenue at a time when Beacon Hill is already having difficulty funding education, infrastructure improvements and other initiatives. The state budget for 2018 is $39.4 billion, and the current 6.25 percent tax contributed $6.21 billion in revenue during fiscal 2017. Beside necessitating cutbacks, reducing the sales tax would harm agencies whose mandate is to create a more favorable business climate for existing and future state commerce.
Significantly, the Massachusetts Department of Revenue has just made the long-awaited announcement that as of October 1, it will begin requiring all online retailers doing business in the Bay State to levy the 6.25 percent tax, thereby undercutting one of the RAM's chief arguments — that the retail playing field is tilted against them. Leveling the field will generate revenue and provide the fairness traditional retailers deserve. How much revenue the state garners from this new move remains to be seen, but until enough time has passed to determine whether fully taxing internet sales will replace the monies lost from a state tax reduction, lowering the current 6.25 percent rate would be most unwise.
On the surface, the concept of lower taxes is hard to resist. Should the RAM manage to place the tax-reduction question on the ballot, however, voters should pause and remember that their already cash-strapped state — whose continuing fiscal health and ability to spend prudently on behalf of its citizens has a direct impact on everyone's quality of life — can ill afford further erosion of its revenues.
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