Senator Robert Hedlund discusses birth of new tax babies

Bob Hedlund

It’s Their Party and They’ll Tax If They Want To!

By Senator Robert L. Hedlund

 It’s easy to become numb to the idea of higher taxes in Massachusetts, since tax increases have become standard operating procedure over the last seven years under one-party rule.

But the latest round of tax increases passed by the state Legislature may be some of the most irresponsible and counterproductive votes I have seen on Beacon Hill.  And how did the Governor respond?  He vetoed the higher taxes because he didn’t think they went high enough.  That’s right, the argument within the majority party is not whether to raise your taxes or not, but how high to raise your taxes.

The formula for higher taxes in Massachusetts has become simple. As the Boston Business Journal recently put it, “Call it tax-hike fever. Or a revenue stampede. Our one-party state has consulted with itself and has decided it can get away with it.”

And the Governor and Legislative leaders are hoping taxpayers are numb when it comes to tax increases or are just not paying attention during these dog days of summer.  But I believe they are about to wake a sleeping giant of fed up taxpayers and small business owners who have had enough of working harder and harder only to get back less and less.

Massachusetts taxpayers already pay the 8th highest state and local tax burdens per capita in the nation, including the 3rd highest income tax burden per capita and the 13th highest sales tax rate in the nation.  Massachusetts taxpayers have to work until April 25th to earn enough money to pay off their total tax bill for the year. That is the 4th latest date in the nation.

Small Business owners do not fare any better. Massachusetts is home to the 5th highest tax burden on businesses, leading to the 2nd highest business costs in the nation.

Higher taxes hurt working families and small business owners.  The Governor and Legislature just poured salt on those tax wounds.

The most foolish of all the latest tax increases that is sure to have the most negative impact is the new 6.25% sales tax on computer system design services and software services. Michael Widmer, president of the Massachusetts Taxpayers Foundation, said it best when he warned the Governor and Legislature that “State leaders could hardly have chosen a more perfect tax to undercut the future of the Massachusetts economy. This is the most sweeping computer and software services tax in the nation. It strikes at the heart of the state’s innovation economy and will stifle job creation for years to come.”

This new tax will hit virtually every business in the state, which are already faced with one of the highest costs of doing business in the nation, jeopardizing many good, high-paying jobs.  As the Massachusetts Taxpayers Foundation put it, employers in the health care, life sciences, biotechnology, finance, manufacturing, hospitality, restaurant, retail, grocery, and other industries will all pay more to improve productivity, generate growth, be more competitive and, most importantly, create jobs.

I have heard from many business owners and managers in my district. They are all telling me the same thing. Not only will this tax have a dramatic impact on their ability to stay competitive and continue to grow and create more jobs, it is likely to lead to layoffs. Even worse, many have questioned whether they would keep their business in Massachusetts after this latest tax hit.  One businessman put the impact succinctly by telling me, “I would prefer to hire locally, but if this tax stays, I will have no choice but to move on, as will hundreds of other software service companies.”

These businesses have been leading the way as innovators and are the future of the Massachusetts economy.  We need to be supporting these businesses to help grow our economy and create jobs, not driving them and our economy’s competitive edge out of state.

The Governor and majority in the Legislature also passed an increase to the cigarette tax of $1 per pack, a 40% increase.  While I do not condone smoking, Massachusetts already has the 9th highest cigarette tax. This increase brings us to number two.  And the Governor and Legislature didn’t increase this tax to fund any health-related spending. They did it to help fund their misguided transportation finance bill.

And then we have the latest increase to the gas tax. You may have heard or read about the 3 cent a gallon increase. That’s bad enough, but what you may not know is that the Governor and Legislature have tied future increases in the gas tax to the consumer price index (CPI), a measure of inflation. That means the gas tax is now almost guaranteed to increase every year, with no vote or accountability from the legislature.

To give that some perspective, over the last 10 years gas prices have nearly tripled.  A gas tax linked to CPI during that time would have increased gas prices by an additional 28%.   Of course, the Governor and Legislature made sure to prevent the gas tax from ever going below the current rate (21 cents/gallon) should the CPI decrease.

What makes this even more maddening is that the price of gasoline is included in the calculation of the CPI.  So as the price of gas goes up, there is upward pressure on the CPI, which, in turn, increases the gas tax. Meaning Massachusetts taxpayers will be hit even harder by gas price increases.

Will a higher gas tax at least lead to better roads?  Have the recent MBTA fare increases led to better service and fewer delays?  The answer to both is No.

Studies show that states which have tied gas tax increases to inflation have a higher than average gas tax burden, but not necessarily better roads.  Before Maine eliminated inflation indexing last year, they had the 16th highest gas tax nationally but ranked 29th in state highway systems on cost versus effectiveness.  Florida, which also indexes their gas tax to inflation, has the 10th highest gas tax in the nation and ranks 37th in overall highway performance.

These outrageous and counterproductive taxes passed by a vote of 34-6 in the Senate and 106-47 in the House. That is 85% support in the Senate and 73% support in the full Legislature. The majority on Beacon Hill are hoping taxpayers stay numb and resigned to higher taxes as just Massachusetts being Massachusetts. I believe they have dramatically underestimated just how far they can push the tolerance of taxpayers and voters.

© Copyright 2013 Tanna K, All rights Reserved. Written For: Tinytown Unleashed