Gov. Deval Patrick’s proposal to lower sales tax while raising income tax rates is meeting with both praise and skepticism in the region, which competes with “tax-free” New Hampshire on a daily basis.
Admitting “there’s no good time to raise taxes,” in his State of the State address Wednesday night, Patrick proposed one of the largest tax increases in recent memory, raising the income tax from 5.25 percent to 6.25 percent, a level unseen since at least before the 1967, according to records from the Department of Revenue. It would also be the first time the governor, or Legislative leaders, broached the topic of raising broad-based taxes since 2009 when the sales tax was increased to 6.25 percent.
If approved by the state Legislature, the 19 percent increase in the income tax would net the state an additional $2.2 billion in annual revenue. The additional money would increase spending for education and the maintenance and repair of the state’s faltering transportation infrastructure.
To offset some of the burden placed on residents by the income tax increase, Patrick also proposes the Legislature reduce the sales tax from 6.25 percent to 4.5 percent, a 28 percent reduction. The loss in state revenue in this area will cost the Commonwealth about $1.1 billion.
The governor further proposes eliminating some corporate tax deductions worth $200 million, netting the state $1.9 billion in annual new revenue. Patrick may also call upon legislators to double the personal tax exemption, and to eliminate a number of “special favors” in tax code to broaden the tax base.
According to long-time Newburyport retailer Ed Gronbeck, who with his wife, Diane, own Market Square’s Brass Lyon, any lowering of the sales tax is a good thing.
“We’d be happy to see the sales tax go down to 4.5 percent,” Gronbeck said. “We compete with stores across the border, and I think this could make a difference. Sales tax, for some people, is an issue.”