Senate Democrats Reject Mass. Sales Tax Holiday, Sales Tax Cut

STATE HOUSE, BOSTON, May 22, 2018 (State House News Service) – The Senate on Tuesday rejected two tax reform proposals that voters may have a chance to settle later this year.

Senators turned down a proposal to grant Bay State shoppers a weekend free from the sales tax this August, an idea that Beacon Hill lawmakers have embraced in the past, and also rejected a budget amendment to reduce the sales tax to 5 percent from 6.25 percent. The tax was raised from 5 percent in 2009.

Seven Democrats joined the seven-member Republican caucus in support of Senate Minority Leader Bruce Tarr's sales tax holiday amendment, which drew 14 votes in favor and 24 votes against as budget deliberations kicked off.

The Retailers Association of Massachusetts this year is advancing a proposed ballot question that would lower the sales tax from 6.25 percent to 5 percent and create an annual sales tax holiday. The measure could be dealt with, however, in behind the scenes Beacon Hill talks over a series of ballot questions.

More often than not over the past decade, lawmakers have agreed to a two-day sales-tax-free weekend in August, promoting the twin goals of boosting retail activity during an otherwise sleepy month and giving parents a break on the costs of purchasing back-to-school supplies.

Retailers Association of Massachusetts President Jon Hurst said he was pleased that there was "good bipartisan support for the concept" in the budget debate and he was not disappointed that it was not added to the annual spending bill.

"They never have done it during the budget process," Hurst said.

The past two summers, lawmakers have cited sluggish state revenues in declining to pass a sales tax holiday. This year state coffers are relatively flush, which might eventually make a sales tax holiday seem more feasible to lawmakers.

State tax revenues through April have poured in $809 million over budgeted revenues for the year and $1.7 billion over the same period last year. In 2015, the last time Massachusetts held a sales-tax holiday, the Department of Revenue estimated $25.5 million in foregone revenue from the exercise.

"Revenues are good. Consumer confidence is high. The question is where do we want the consumers to spend their money?" Hurst said, calling the sales tax holiday a "vital tool" to keep sales in state.

During Tuesday's debate, Jamaica Plain Democrat Sen. Sonia Chang-Diaz said she would rather pay a sales tax than see schools rely on parents for donations of classroom supplies like crayons and pencils.

Tarr countered that lawmakers should consider the plight of brick-and-mortar retailers competing against tax-free online sales and tax-free stores in New Hampshire while also seeking to hire workers in a tight labor market.

Even when they do support a sales tax holiday, legislative leaders usually try to foster an element of surprise so that the holiday spurs new sales instead of just encouraging consumers to delay their purchases until the tax-free weekend. Formal sessions end July 31 giving supporters of the holiday more than a month to try to get it to the desk of Gov. Charlie Baker, who is a supporter of both the sales tax holiday and a sales tax reduction.

The Democrats who voted Tuesday to include a sales tax holiday provision in the fiscal 2019 budget were Paul Feeney, of Foxborough; Anne Gobi, of Spencer; Adam Hinds, of Pittsfield; Michael Moore, of Millbury; Michael Rush, of West Roxbury; Walter Timilty, of Milton; and James Welch, of West Springfield.

Baker has said he supports lowering the sales tax, but he wants lawmakers to find a compromise that avoids a sales tax question on the November ballot and also dispenses with other proposed ballot questions, such as a bid to raise the minimum wage and another to institute a paid family and medical leave program in Massachusetts.

The Senate defeated Tarr's bid to lower the sales tax on a voice vote Tuesday.

[Sam Doran contributed reporting]