Compromising with two groups pushing separate ballot referendum questions, Massachusetts lawmakers increased the state’s minimum wage and established a regularly scheduled sales tax holiday.
Gov. Charlie Baker signed House Bill 4640 into law on June 28, raising the state’s minimum wage from $11 an hour to $15 by 2023.
In return for the legislative enactment of their goal, Raise Up Massachusetts agreed to withdraw its ballot question asking voters to approve increasing the state’s price floor on wages to $15 per hour by 2022.
The new law also establishes an annual sales tax holiday to take place each August.
Accepting that concession, the Retailers Association of Massachusetts suspended its ballot campaign to reduce the state’s sales tax by 1.25 percent and create a regularly scheduled sales tax holiday weekend.
Tougher on the Poor
Paul Gangi, program director for the Massachusetts Fiscal Alliance, says the state’s tax rates are bad for low-income people living and working in Massachusetts.
“Neighboring New Hampshire has no sales tax, and Massachusetts’ is 6.25 percent,” Gangi said. “Sales taxes are a regressive tax. The sales tax has a larger impact on lower-income households because it consumes a larger portion of their income.”
Considers Holidays Ineffectual
Mark Rider, an associate professor of finance and economics at Georgia State University, says sales tax holidays don’t create new economic activity.
“The consensus view is that sales tax holidays merely move purchases around; they don’t really stimulate additional sales,” Rider said. “Sales taxes raise the prices of goods, which means that people have less disposable income to spend on goods.”
Reducing the tax rates on business owners and consumers year-round would promote economic prosperity, Gangi says.
“The goal of the sales tax holiday is to create economic activity by incentivizing the purchase of goods,” Gangi said. “If Massachusetts really wanted to help its retail businesses, it would make itself competitive with neighboring states by dropping its rate permanently.”