Sales Tax Increase on the Way?

The media generated talk these days has many focused on the possibility for an increase in the sales tax as a way to forestall some of the major cuts put forward in the House budget. The Globe has run a couple of stories, with Speaker Deleo indicating he was “open” to discussing a sales tax hike, with a follow up story pointing to increasing support amongst House members for increasing the sales tax. With the House budget creating outrage amongst the many constituencies facing steep cuts the House has a raft of budget amendments that attempt to raise revenue, including hikes in the income tax, (a full point), a 29 cent increase in the gas tax, a two point increase in the sales tax, and a broadening of those items that have a sales tax attached. Quite a lineup. Lets take a very quick peek at some of the numbers involved.

A one cent hike in the sales tax is estimated to bring in $750 million at the top end. With the economy performing as it is I doubt that you would hit that number, so lets say you hit $650 million. The House budget gap for FY 2010 was over 2 billion, and although that huge gap was closed by Chairman Murphy the budget is balanced on a precarious revenue number. (House Ways and Means cut the revenue estimate by Governor Patrick by about a half billion, but their own lower number appears too be to high) With that in mind Senate budget writers may be forced to further downgrade revenue estimates, with the result that an additional $500 million may be needed to keep the level of spending that is contained in the House Ways and Means budget that we are all complaining about. In short, adding one penny of a sales tax increase directly into revenue for FY2010 may, after the Senate gets done, produce the exact same level of spending contained in Chairman Murphy’s budget. That should be a sobering thought for many who think that a sales tax hike of one penny will produce miracles.

The Globe stories also refer to some on the Senate side who have referenced a sales tax hike as a possible substitute for a gas tax hike. That scenario certainly would help clear up some of the mess we are in on the transportation side, but would leave just about nothing for any other budgetary problems. The gas tax will bring in about $27 million per penny of increase. With the MBTA needing $160 million and the Turnpike needing about $100 million for next year the choice for the Legislature is clear. 1) Provide no revenue stream for either, and watch both sink into insolvency 2) Provide a ten cent gas increase, and as the Governor has outlined dedicate 6 cents to the MBTA, and 4 cents to the Turnpike, leaving out the Governor’s other spending requests relative to Transportation 3) Pass a gas tax of less than ten cents (or no gas tax) and provide $260 million to transportation from another revenue stream such as the prospective sales tax increase (less any of that prospective gas tax under a dime). Under scenario 3 there simply will be no additional revenue to pass along to any of the constituencies looking for more help than the ways and Means budget offers, including local aid. With the revenue numbers referenced earlier any attempt to substitute the sales tax for the gas tax will displace normal budgetary priorities in order to put a band aid on the mess we are in on Transportation.

On top of the bad choices outlined above the top leadership in the State do not appear to be in concert on revenue. The Governor, up to this point, has expressed strong reservations about hiking the sales tax. The Governor appears to be standing by his revenue proposals, including additional levies on soda, beverage alcohol, and a statewide meals tax. The Governor’s proposals, unlike anything I have seen in the Legislature, dedicate the meals tax increase to local aid as well as giving municipalities some local option tax choices. Maybe I missed it but a one cent hike in the sales tax does not appear to have any portion dedicated to local aid. If there is to be a revenue solution it needs to have some portion dedicated to local aid, as the Governor’s proposal does.

The dismal outlook tends to support the proposition that revenue alone cannot bring us into budgetary equilibrium. Reform alone cannot achieve the trick either. But the idea that you can defer real reform until later, or not impact the current state and municipal workforce is just not correct. The budget is structurally out of balance, and even if you raise taxes this year budget escalations built in to state and local budgets will overwhelm us again next year. (What will the increase be in the Massachusetts health care budget for FY2011? What will be the increase in local health care and pension costs?) Reform is a critical part of the budgetary equation, and without it we will not get out of this mess.

The below numbers are what the Governor proposes to spend his recommended 19 cent gas tax increase on.

4 cents to roll back the proposed toll increases on the Turnpike
6 cents to preserve current MBTA services and prevent a fare increase
1 cent for Innovative Gas and Toll Solutions
1.5 cents for Regional Transit Authorities
1.5 cents for targeted regional road projects
3 cents for rail projects outside of Boston
2 cents to address the costly practice of paying for personnel with bond funds

This entry was posted in Uncategorized and tagged , . Bookmark the permalink.

9 Responses to Sales Tax Increase on the Way?

  1. Jules Gordon says:

    And just think, your honor, we get to go through this again next year.

    Now I know why you post verbose blogs about sing song Republicans; deflection.

    Everyone repeat after me, ‘Reform’ before ‘Revenue’.

    I also notice there is no Obama stuff. He’s kind off showing his community organizing skills. For instance, his opening of the CIA files to embarrass the previous administration is blowing up in his face.

    Also his homeland security secretary, who equates RWT, returning veterans and Canadian border leaks, is making it necessary for him to go on another ‘apology tour’.

    Jules (official RWT)

    Like

  2. Bill Manzi says:

    Jules,

    Just as a point of reference for you. Republican Governors, starting with Bill Weld, began some of the destructive fiscal policies that have landed us where we are today. It was Weld who started the practice of paying regular Mass Highway personnel with capital funds. It was Weld/Cellucci/Swift/Romney who had operational control over the Big Dig, and it was their determinations that led to shifting Big Dig debt onto agencies that could not afford to take on such debt. (Like the Mass Pike and the MBTA)

    Governor Patrick inherited a huge mess. And why is that mess there? Because the usual Republican notion that you can do a 20 billion dollar transportation project and no one would have to pay for it set in on Beacon Hill. (Yes many Dems drank the spend but do not pay kool-aid) It is a uniquely Republican notion that no spending needs to be paid for. Run two wars at the same time? Lets keep those figures off book, and just add to the deficit. You want to add a prescription drug benefit to Medicare? Great, do not worry about who will pay. You want to give tax cuts when you are running deficits? Do not worry. We can borrow from the Chinese. The Republicans have invented the fiscal shell game, and honed it to perfection. Now, our guy takes over and you want to blame him for the train wreck that your conservative pals have created for this state and country. First Republicans burn the house down, and then they throw rocks at the people trying to put out the fire. Great political strategy, but truly sad for the country.

    Bill

    Like

  3. Jules Gordon says:

    Wow, Your Honor,history from the time the earthed cooled.

    All that stuff you said above is irrelevant. There wasn’t enough money to pay for that boondoggle no matter whose supervision it was under. Maybe we would be better off if Tip O’neal did not bring it here in the first place.

    The problem Massachusetts has is that it lards up the budget for votes. Adds to it in “good times” when revenues are high, then it raises taxes when the economy tanks.

    Now, the budget is full and the folks are taxed up to their eye balls.

    Probably the point is that Deval hasn’t fixed either. The state legislature and the “on the dole” public they represent have brought everything to the max. All that other stuff doesn’t matter.

    Jules

    Like

  4. Summer says:

    Right on Mayor Manzi! The Republicans like to call the Democrats the tax and spend party. At least we are willing to tax for what we need to spend. Republicans just, spend, spend, spend and leave their fiscal mess for the Democrats to clean up. Not fair!

    Like

  5. Jules Gordon says:

    Your Honor,

    At least Summer recognizes the fact that the Democratic Party is tax and spend, tax and spend……etc.

    Summer, the fiscal mess in Massachusetts is strictly Democrat created. There are no Republicans of consequences. You’ll catch on when the Democrats resolve the Massachusetts budget in the next 2 years. Taxes up and up and up…………and up.

    Jules

    Like

  6. Bill Manzi says:

    Jules,

    You simply ignore facts that are inconvenient to your point of view. No Republicans of consequence? What about Weld, Celucci, Swift and Romney? You say that no amount of money could have paid for this boondoggle. Yet that is not true. $20 billion could pay for it. You forget that it was Weld Celucci Transportation czar Jim Kerasotis who said that the Big Dig was “on time and on budget”. It was Weld /Celucci that hid the ongoing cost overruns from state and federal auditors, and it was Weld/Celucci who started the practice of paying regular Mass Highway workers out of the capital account. Not only did they bungle the management of the Big Dig, they took active steps to cover up their malfeasance. Republicans do not wish to pay for what they spend. You call Dems tax and spend. I call Republicans spend and hide.

    Like

  7. Jules Gordon says:

    Your Honor,

    I remember when the legislature removed the alcohol enforcement department from Romney when he displeased them.

    I guess they could have stopped all of the other problems too. Takes 2 to tango here.

    Unless the democratic legislature was dead. When the evil Republicans pulled off their hair brained idea for funding were you complaining of the consequences? Did you bring the complaint to your ‘friends’?

    I will even concede the point about the changes, but I remember no complaints.

    Jane Swift as consequential????

    Did Weld get brought up on charges? Hiding cost overruns is illegal, isn’t it?

    I remember the hearings as the costs kept rising and rising.

    I also noticed the legislature kept spending and spending. Republicans are inconsequential in this state, but there is no good guy here either.

    Jules

    Like

  8. Bill Manzi says:

    I have never exonerated anybody in state government, including the Legislature. As far as breaking the law it was quite clear that false statements about costs and project status were made. While no charges were filed federal moneies were impacted, and Jim Kerasotis was forced to resign. I liked Bill Weld, and still do, but the determinations made during that era are DIRECTLY responsible for the mess we are in now. And the Democratic Legislature bears responsibility as well. But the Republicans were managing.

    Like

  9. Jules Gordon says:

    Your Honor,

    I believe we are beginning to come to an agreement. I am not one who thinks that a Republican run state would be superior. That has been demonstrated when the Republicans won controlo of the congress and proceeded to screw things up by mimicing Democrat policy rather than its own principles.

    This state would be better off if there were a competing opponent requiring true compromise (not bipartisanship-we will have to discuss compromise rather than bi-partisanship). I somehow remembr a somewhat cordial relationship (in public) between Clinton and the Repubican congress and things got done.

    I will buy your settling of our argument of blaming the single Republican Governor as the fault over the dominant Democratic legislation due to his position as the manager so we can move on.

    So since Deval Patrick is a Democrat I accept him as the fault for not fixing our present woes.

    Jules

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s