Massachusetts Gov. Deval L. Patrick (D) has proposed an array of tax hikes in a bid to plug an estimated $1 billion hole in the state’s $28 billion 2010 budget.
Patrick wants to eliminate the current sales tax exemption for all candy, soda, sweetened beverages, liquor, and even fruit drinks. He also is attempting to raise the state’s gasoline tax by 27 cents a gallon, impose higher taxes on restaurant meals, and expand the state’s ability to collect taxes on Internet sales.
If the proposal passes, Massachusetts will have the highest gasoline tax in the nation at 50.5 cents a gallon. The tax will rise annually with the Consumer Price Index.
Campaigning for Support
The Massachusetts Restaurant Association was quick to respond to the governor’s proposals. Peter Christie, CEO of the association, said in a press release, “This proposal singles out restaurants at a time when they can least afford it.”
Tom First, co-creator of Nantucket Nectars, a popular brand of bottled juices, said of Patrick’s proposal to remove the sales tax exemption from candy and soda, “That’s ridiculous. So if I buy a juice I have to pay taxes, but if I buy a cookie I don’t?”
Patrick is campaigning across Massachusetts to rally residents to support his budget, touting the package as a reform measure. He notes his bill uses the state’s “rainy day” reserves to plug the budget hole in addition to using tax increases.
“We are one commonwealth,” the governor said in an appearance in Western Massachusetts. “We need to stop acting like we can have something for nothing.”
‘Not Thinking About Businesses’
Holly Robichaud, a longtime Massachusetts-based political and public relations consultant with ties to the Republican Party, said, “I don’t believe that Governor Patrick is thinking about local businesses.”
Robichaud believes the chief problem behind the governor’s proposal is that he lacks empathy with small businessmen.
“The problem with many politicians is that they don’t have small business or self-employment experience,” Robichaud said. “They have never seen how much a burden taxes can be. For example, every self-employed person in Massachusetts is now required to get prescription drug coverage or get fined. That is an additional cost of $600 per year.”
Jim Stergios, an expert on Massachusetts state politics at the nonpartisan Massachusetts-based Pioneer Institute, believes the governor consistently reacts to bad budget news with a desire to raise taxes.
“The governor has shown a disappointing reflex.” Stergios said. “He addresses budget shortfalls by making deep cuts in safety net programs and banking on new taxes and fees. It’s bad for the vulnerable, and it is bad for business.”
Governor’s ‘Political Game’
Robichaud believes the governor is attempting to trick Bay State residents with his proposed increase in the state gasoline tax.
“The gas tax is a bait and switch situation,” Robichaud said. “First the governor proposed $7 tolls [on roads]. People objected and warmed to a gas tax that would spread the burden, but they never thought it would be a 100 percent increase. But 27 cents is not what Governor Patrick wants. He really only desires 15 cents per gallon.
“Asking for more than he needs is just a political game,” Robichaud continued. “Moreover, many toll critics said they support a gas tax hike with the removal of the toll booths. While they are fighting the huge gas tax increase, he will be able to keep the toll booths, which allows the politicians to increase tolls in the future.”
Revenue Could Fall
Janine Harrod, director of government affairs at the Massachusetts Restaurant Association, believes Patrick has yet to realize his proposed tax increases may actually drive down total revenue.
“I don’t think that Gov. Patrick realizes that adding an additional tax on restaurant meals will actually have the opposite effect [from what] he is looking for,” Harrod said. “Consumers’ discretionary spending is based on a finite amount of money. If you raise the tax by 2 percent, for example, you cannot assume that people’s spending will grow by that amount.”
Harrod believes the proposed new restaurant taxes in the governor’s budget could lead to Massachusetts businesses closing down and laying off workers.
“The association also believes that [these new taxes] will create a disincentive to dining out during a climate already overcome by falling consumer confidence,” Harrod said. “This will hurt many restaurants that are on the cusp of going out of business.”
No Spending Reform
Stergios says Patrick seems to prefer to focus on generating new revenue streams for the state instead of instituting government reforms that would save Massachusetts money.
“The governor has talked an awful lot about big reforms of public pensions and benefits, but he tends to put more energy behind new revenue proposals because it is politically easier,” Stergios said. “Unfortunately, that’s not leadership.”
Patrick’s proposed tax increases appear to be rattling the foreign business community in Massachusetts. The Organization for International Investment has asked its members to cut staff or spend progressively less in Massachusetts because of the governor’s new tax plans.
The OII represents Novartis, National Grid, Ahold USA, Thomson, Alcatel-Lucent, UBS, Suez Energy, Covidien, Pearson, Nestle, Michelin, GlaxoSmithKline, Virgin Airlines, Lufthansa, and Sony in Massachusetts.
The Massachusetts budget usually is signed into law at the end of May.
Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.
Thomas Cheplick, a freelance reporter for The Heartland Institute, writes from Cambridge, Massachusetts.
