The Speaker Makes His (Tax) Move

Speaker Bob Deleo has finally shown his hand on revenues, coming out for a 1.25% increase in the sales tax. Both the Globe and Herald are reporting that the Speaker will support this increase, with the hope that the increase will bring in about $900 million in added revenue. Speaker Deleo plans to dedicate about $275 million to Transportation and about $200 million to local aid, which would leave about $425 million for restoration of other budget cuts. That is the plan as reported, and although I hate to rain on the Speakers parade let us look at some important facts.

1) The 1.25 percent increase will not raise $900 million but will raise about $800 million, if they are lucky. That is my best guess, but sales tax revenue has been in steady decline. Just ask the T how the 1 percent has been working out for them.

2) Revenue Estimates. Yes it is a boring subject, but it is at the core of why this gambit is destined to fail. The House budget relies on a revenue estimate that most sane folks think is short. That shortfall is likely no less than half a billion. If that number is correct then more than half of this increased revenue will be washed away when and if the Senate downgrades its Revenue Estimate when they unveil their budget. That would leave $275 million for transportation and $200 million for local aid, with the human services folks left holding the bag. And that presupposes that the Senate agrees on a sales tax increase of that magnitude and also agrees on the spending priorities outlined in the House version. Assumptions like that are politically dangerous, and put House members in the precarious position of possibly voting to increase taxes and having the Senate and or Governor pull the rug out from under them. I assume the Speaker has built some consensus with Senate President Murray and the Governor. If he has not then the House may end up with egg on its face.

3) The Transportation piece, while adding up to about a gas tax increase of 10 cents, will allow funding of the T at $160 million and the Turnpike at $100 million. Both agencies, with existing cost structures, will need substantially more almost immediately. None of the other vital Transportation needs, including bridge and road repair and taking Mass Highway employees out of the capital budget, would be dealt with.

4) With no cost structure relief the budget problems will just keep coming back. And the anticipation of relief from some of the cuts offered by Chairman Murphy will be an illusion.

5) Where is the Governor? What is his position on the Speaker’s proposal? He has, in the recent past, said that he would veto a gas tax increase that did not provide for full funding of the system. He has also said that he is not in favor of a sales tax. (Although he has refused to offer a veto threat). This proposal does not appear to give the Governor anything except a piece of transportation funding. And his House 1 budget is now not worth anything, since his revenue estimate is so wildly off. Yet the Governor has not stepped forward to revise House 1 in any way. He could still impact the House vote with a veto threat. Will he do so?

The prospective sales tax hike is bad for Methuen, even with the inclusion of new dedicated local revenues. We have managed to build a major retail presence on the Massachusetts side of the border in spite of state tax policy that has just about destroyed retailing along the New Hampshire border. That retail and business presence provides major tax revenue for our City, as well as jobs for citizens of the Merrimack Valley. Municipalities need new revenues, but this proposal, for Methuen, is a job and economic development killer.

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4 Responses to The Speaker Makes His (Tax) Move

  1. Gerard Donahue says:

    Mayor Manzi:

    As it truly amazes me, I do agree with you on part of it. We know the money needs to come from somewhere. The Loop is a wondrous addition to Methuen and would be hurt by the sales tax increase. This can then off shoot to where the Wal Mart, Target et al are as well(not trying to jinx). They need to look at reforming Beacon Hill before this.



  2. Summer says:

    The problem with the whole reform issue is that many of the Representatives and Senators profit by the status quo. Pension reform will be hard because they are essentially voting on their own retirement program. What is the incentive for them to change it?? I am sure there is great concern for their re-election campaigns if they raise taxes at all. Back in the late 80’s early 90’s many of the sitting Senators nd Reps. were all voted out after the income tax increase. They have much to worry about should “revenue enhancement” prevail before reform.


  3. Jules Gordon says:

    Your Honor,

    I need a definition. The sales tax presently at a 5% rate is proposed to go up to 6.25% (1.25% point rise) which is a 25% increase.

    Is that correct?



  4. Bill Manzi says:

    That is how I make it Jules. 25 percent increase.


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