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Most localities resist the call of the tax hike

Just a fraction raise levy on rooms, meals

By David Abel
Globe Staff / September 1, 2009

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Fewer than 10 percent of the state’s cities and towns have voted to raise their restaurant or hotel taxes, forgoing tens of millions of dollars in potential revenue but holding down prices for consumers.

Municipalities had to vote and inform the state Department of Revenue by yesterday if they planned to raise their restaurant and meal taxes this year. During the summer, the Legislature voted to allow municipalities to raise restaurant taxes from 6.25 percent to 7 percent and hotel taxes from 4 percent to as much as 6 percent, as of Oct. 1, as a way to cover local budget deficits.

State officials said that if the 351 towns and cities increased their taxes, they stood collectively to raise an additional $58 million annually in restaurant taxes and more than $33 million a year in hotel taxes. But as of late yesterday afternoon, only 25 had voted to increase their restaurant taxes and only 29 approved the hotel tax hike, leaving about $50 million in potential tax revenue untapped.

“I don’t think it’s ironic that the numbers aren’t higher,’’ said Pat Mikes, a spokeswoman for the Massachusetts Municipal Association, which prodded lawmakers to allow municipalities to raise local taxes. “I anticipate more communities will take the issue up in the coming months. There has to be discussions and a process before many communities are willing to raise taxes.’’

The state’s municipalities can seek approval every three months to raise their local taxes.

Many of the state’s densest communities voted to increase their taxes, including Boston, Cambridge, and Brookline, which together will raise an estimated additional $14 million in meal taxes and about $17 million in hotel taxes.

“Additional local-option tax revenue will help us avoid widespread employee layoffs and prevent dire cuts to core city services,’’ Mayor Thomas M. Menino said in a statement announcing Boston’s decision to raise local taxes and increase the city’s overall hotel tax to 14.45 percent. “The new revenue will not make up for more than $90 million in state aid cuts we suffered recently, but it will help. No one likes new taxes, but as I see it, these local-option tax increases will help us diversify our revenue stream, which is crucial in times when state aid is being so dramatically reduced.’’

A number of smaller towns and cities rejected the tax increases.

Dale Pleau, Mendon’s coordinator, said selectmen in his town of 6,500 people decided to nix the tax increases, even though the projected $36,000 in additional revenue would have helped the town avoid other cuts and offset much of the $49,000 in state aid it lost last fiscal year.

“The Board of Selectmen didn’t want to visit the state’s problems on local businesses or their patrons,’’ Pleau said. “They were philosophically against it. It was a unanimous vote.’’

Eugene Phillips, Hopedale’s administrator, said his town of 6,100 residents stood to raise only about $5,700 in additional revenue. He said the revenue would not have helped save the jobs of local police dispatchers, the fire chief, and seven teachers, all of whom were fired this year.

“We had no arguments in favor of raising the taxes,’’ Phillips said. “The rationale is that the town has very few restaurants - four, to be exact - and the additional taxes wouldn’t have gotten us very far. The selectmen decided the businesses were already in tough enough shape that they didn’t want to add to the burden.’’

In Woburn, local lawmakers decided to raise hotel taxes but to reject increasing the restaurant tax, even though they had a $750,000 budget shortfall in fiscal 2009. Raising the restaurant tax would have brought in an estimated $500,000 in additional revenue.

Woburn Mayor Thomas L. McLaughlin said representatives of his city of 38,000 people believed that raising hotel taxes wouldn’t hurt local residents, but raising the restaurant tax would. “With the hotels, there was no opposition,’’ he said. “But we didn’t want to hurt our local restaurants, when other towns may not approve the meals tax. We didn’t want to discourage anyone from coming to our restaurants. With hotels, it doesn’t affect local residents, because few of them stay there.’’

Officials at the Massachusetts Lodging Association, which lobbied against the tax increases, said they were pleasantly surprised the state’s municipalities did not rush to raise their taxes.

“Given the state’s economy and many local budgets, I thought a lot more would take the option of increasing their taxes,’’ said Paul J. Sacco, the association’s president. “I consider the number of municipalities that have signed on to these tax increases a low number.’’

Peter Christie, president of the Massachusetts Restaurant Association, which represents about 5,000 restaurants statewide, also has been encouraged by the absence of a stampede to raise taxes. But he and others are more worried about the precedent than about the .75 percentage point increase in meal taxes.

“Our objection is that this is a slippery slope,’’ Christie said. “No one’s going out of business because of a .75 percent increase. We’re worried about next year when there are more budget cuts. You can be sure that the Legislature is going to increase it even more then.’’

David Abel can be reached at dabel@globe.com.