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March 29, 2017

House speaker opposes potential sales tax reduction

House Speaker Robert DeLeo, who in 2009 spearheaded the last major increase in the state's sales tax as the recession ravaged the state's tax base, said lowering the tax rate now, after a prolonged recovery, would put Massachusetts in a "precarious financial situation."

Frustrated by the tide of tax-free sales transacted online, retailers this week said they are considering the launch of a ballot campaign in 2018 to lower the sales tax from its current 6.25 percent. The Legislature raised the former 5 percent rate almost eight years ago as part of a plan to generate $1 billion in new revenue to support the state budget.

Though the small business owners represented by the Retailers Association of Massachusetts have not specified how low they'd like the tax to go, DeLeo said he could not envision a scenario under which he would get behind such an effort.

"No. I think that right now the way I look at it anytime I talk about raising taxes it's always, as you know, the last ditch effort. I think right now for us to lower, in terms of what we have, further now I think would put us in a more precarious financial situation," DeLeo told the News Service on Wednesday. 

DeLeo, who supports a proposed income surtax on wealthy earners, also noted that the income tax rate - currently 5.1 percent - "may be lowered again" in January to 5.05 percent if certain economic triggers are met reducing revenues by $83 million next fiscal year.

A poll conducted for the retailers association in November by Princeton Research Associates found 79 percent of respondents in support reducing the sales tax to between 4 percent and 4.5 percent to make the tax system fairer and to support local retailers.

Former Democratic Gov. Deval Patrick tried to lower the sales tax to 4.5 percent as part of a broader tax reform that would have also increased the income tax rate in a restructuring of the tax code that Patrick believed to be fairer.

Democratic lawmakers rejected the governor's proposal in 2013, and instead crafted their own package of tax hikes - including a cigarette tax increase and gas tax hike - to raise additional revenue.

If retailers pursue the sales tax question they would likely share space on the ballot with a proposed constitutional amendment that would impose 4 percent surtax on household income above $1 million.

The so-called "millionaire's tax" has been estimated to generate close to $2 billion in new revenue, but organizers behind the campaign have stipulated that the money should be used by the Legislature to support education and transportation.

"That's going to be strictly for the transportation and education, so I think that with all the other considerations that we have I think it would be difficult for us to talk about lowering the sales tax," DeLeo said.

Gov. Charlie Baker, who in the past has supported a 5 percent sales tax, but opposed lowering it all the way to 3 percent, said this week he would reserve judgment until he saw a proposal.

"That one has a long way to go before it ends up coming before the voters and if it does, obviously, we'll talk about it then, but I did support back in 2010 the idea of reducing the sales tax from 6.2 to five and there's no question that retailers in Massachusetts face tremendous competition and pressure from our colleagues north of the border who don't have a sales tax at all," Baker told reporters at the State House Monday.

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