Thursday, May 14, 2009

BHI in the Boston Globe: Sales tax hike necessary?

BHI Executive Director David G. Tuerck in today's Boston Globe:
On this matter, it is the governor who is right and the bill's sponsors who are being "disingenuous." For one thing, the $900 million estimate apparently ignores the fact that sales taxes drive business to other states and to the Internet. Under the new law, a TV set that could be bought for $1,000 in New Hampshire will cost $1,062.50 in Massachusetts, just another reason to drive an hour to make a big purchase and to stock up, along the way, on liquor, cigarettes, and other items.

The proposed tax hike will have negative consequences for the state economy. We predict a loss of 12,666 private-sector jobs, as stores in Lawrence and Lowell lose business to stores in Salem and Nashua. And because unemployed workers stop paying income taxes, the state will lose revenue from that source even as it gains revenue from the sales tax. In fact, the higher sales tax can be expected to yield only about $674 million in new revenue when losses in other revenues are accounted for.

Before the Legislature decides to inflict a new burden on state taxpayers, retailers, and workers, it would do well to ask just why it wants to enact a broad-based tax increase in the first place. A 25 percent increase in the sales tax would be a panicky response to what was seen just a few years ago as an exercise not in fiscal ruin but in fiscal dexterity.

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