Yesterday, with significant fanfare and reporters present, Governor Patrick signed into law a stimulus bill for the New Hampshire Retailers Association and e-commerce websites. By increasing the Massachusetts sales tax by 25 percent, both Mr. Patrick and the legislature have enacted the equivalent of the Northern Massachusetts Uncompetitive Act. This ensures that those retail vacancies, that are already abundant, will continue to rise (consequently local real estate rolls and real estate tax revenues will decline).
Fortunately New Hampshire retailers and Amazon.com will continue to thrive under this legislation. Unfortunate as it is for Massachusetts retailers, consumers will search out these lower taxed havens. No need to send jobs to China when we can send them right over the border to New Hampshire.
Let’s look at some of the tax increases and other highlights of the bill enacted yesterday by the Governor Patrick:
Increase the sales tax by 25 percent – The new law will increase the sales tax from 5 percent to 6.25 percent. This will cost Massachusetts tax payers $759 million, or $291 for every household in the state. For owners of small retail shops in the state, the cost will likely be significantly more.
Sales tax on alcohol – Alcohol purchased from liquor stores have historically not been subject to the sales tax, as the state already imposes a hefty excise tax on these purchases. For instance, a 1.75 liter of distilled spirits already has approximately $2 dollars of state excise tax. A $25 dollar purchase of spirits will now increase the states take on the sale by a whopping 78 percent, to $3.56. The state is now charging sales tax on the $2 of excise tax that they already charge. In the eyes of Mr. Patrick and the legislature, double taxation is twice as good as single taxation. This increase will generate $79 million of additional taxes to the state and cost the average family some $30 annually. We can only guess the cost to the local liquor store owners and their employees.
Increase in meals tax by up to 40 percent – The tax on restaurant meals will increase from 5 percent to 6.25 percent. Additionally, the state is now allowing the local towns to impose an additional local meals tax of 0.75 percent to each bill. Thus, the state and local government take will in all cases rise 25 percent, and in many cases it will rise 40 percent.
Satellite television tax – For all of you folks egregious enough to have a satellite dish, the state will now be imposing its sales tax on you. Approximately 300,000 people use Direct TV or Dish Network in the state. Each of you will now be paying approximately $94 more per year for the new state sales tax on your service. This tax is not applied to cable television subscribers. (As you can guess, the cable TV lobby was strongly in favor of this increase.)
Hotel tax increase – The state charges a 5.7 percent hotel tax rate. In addition, local cities and towns can charge up to 4 percent. The new law allows the local hotel tax to increase up to 6 percent, or 50 percent more than previously charged.
Additional auditors – For good measure, the state will add $17.3 million to the Department of Revenue for additional auditors and enforcement. The hope is to generate $26 million of additional tax revenue.
The total tax increases in this law are over $1 billion. Last year Mr. Patrick signed laws which increased taxes by some $650 million. Next year he is shooting for the trifecta and will be supporting an increase in the gas tax (he has already indicated his support for this measure).
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