, Newburyport, MA

June 16, 2014

Editorial: Sales tax holiday conceals need for real reform

Newburyport Daily News

---- — Once again, the Massachusetts Legislature is working on plans for a sales tax holiday weekend in August.

The holiday, over which Bay State residents do not have pay the usual 6.25 percent sales tax on their in-state purchases, is a popular one. Supporters in the Legislature say it helps boost the state’s retail economy.

But if legislators were truly concerned about boosting the economy and helping Massachusetts residents save a little money, they’d eliminate the sales tax altogether — or at least roll it back to its former level of 5 percent.

Don’t hold your breath waiting for that to happen.

This year’s sales tax holiday was tacked onto an economic development bill in the House by Minority Leader Brad Jones, R-North Reading. The tax-free weekend would be held Aug. 16-17. The exemption would not apply to tobacco products or items that cost more than $2,500. The measure still requires the support of the Senate and Gov. Deval Patrick.

Already, legislators are fretting about the $20 million or more the state could lose in sales tax revenue. Last year’s sales tax holiday cut the state’s take by $24.6 million.

Simply by the way legislators talk about the sales tax holiday, one can see their views on taxation. The idea that the state will “lose” tax revenues and that the holiday has a “cost” shows that, to legislators, your money is in fact their money. Letting you keep a little more of what you’ve earned is a privilege they may — or may not — grant.

The sales tax is always a touchy issue here in the Merrimack Valley, where retailers must compete with competitors across the state line in “tax-free” New Hampshire. Indeed, merchants in Southern New Hampshire routinely seek to lure customers across the border with the claim that there, every day is a “sales tax holiday.” The tax holiday weekend in Massachusetts only serves to emphasize the point.

Retailers love the sales tax holiday. In 2012, merchants racked up $330 million in sales.

But according to a report from the Tax Foundation, a Washington-based public policy think tank, sales tax holidays actually do little to stimulate new economic activity. Consumers merely put off planned purchases until the holiday weekend to reap the tax advantage.

“Political gimmicks like sales tax holidays distract policymakers and taxpayers from genuine, permanent tax relief,” the report states. “If a state must offer a ‘holiday’ from its tax system, it is a sign that the state’s tax system is uncompetitive. If policymakers want to save money for consumers, then they should cut the sales tax rate year-round.”

Given a choice between a sales tax holiday and letting lawmakers extract another $24.6 million from our wallets, we’ll take the holiday every time.

But we’d rather see a real policy debate over the relative economic advantages and disadvantages of the sales tax. Sadly, that kind of political courage or forward thinking just doesn’t exist on Beacon Hill.