Increasing the state's sales tax by 20 percent will have negative effects on the Massachusetts economy. According to BHI's trademark STAMP tax model, raising the rate to 6% would destroy approximately 10,000 jobs and preclude some $41 million in business investments. Sales taxes raise prices. They may raise revenue in the short-run but they have corrosive effects over the state's long-term competitiveness. A higher sales tax also means that shopping across the border in New Hampshire for big ticket items such as furniture, electronics and other home goods becomes more attractive. Moreover sales taxes (including the state's generous exemptions for necessities) are always regressive.
The BHI FaxSheet is available here.
Background on the current proposal from the Boston Globe.
Who's to blame for the fiscal crisis facing all 50 states? Reason Foundation suggests the states, for spending far beyond population growth and inflation.