Legislative Leaders Balk At Baker's Sales Tax Holiday Proposal

Gov. Charlie Baker's last-minute attempt to offer shoppers and retailers an August sales tax holiday isn't going over well with legislative leaders.

Baker on Wednesday filed a bill to suspend the state's 6.25 percent sales tax over the weekend of Aug. 19 and 20, a move retailers say offers a welcome boost during sluggish summer months. The tax suspension would apply to goods costing $2,500 or less.

“The sales tax holiday gives consumers a much needed break and supports business across the Commonwealth for our hardworking retailers,” Baker said in a statement. “We look forward to working with the Legislature to make this important weekend possible."

The sales tax holiday has become a fairly regular August occurrence over the past decade or so. But lawmakers opted to forgo the tradition in 2016, citing sluggish revenue growth.

The state's financial picture hasn't changed much since then. The state announced last month it ended fiscal year 2017 with a $431 million revenue shortfall, coming in 1.7 percent below projections. And in signing a new state budget last month, Baker vetoed $320 million in spending and revised tax revenue projections for fiscal year 2018 down by $749 million.

House Speaker Robert DeLeo said in a statement that "it makes little sense for the Governor to file this legislation now when there are several similar bills already in committee."

He also cited the state's financial situation.

"This year, the Commonwealth experienced unpredicted revenue shortfalls and accordingly, the Legislature had to make significant budget cuts to programs and services," DeLeo's statement read. "In doing so, however, we protected and prioritized the most critical services and programs. We also maintained our support for local cities and towns."

DeLeo said those choices all benefit local businesses, "which require a strong local economy and infrastructure to thrive in the long-term."

In 2016, DeLeo said the sales tax holiday would cost the state $26 million.

Senate President Stan Rosenberg said Baker's sales tax holiday bill would be sent to committee for review, but noted that the state's "fiscal situation hasn't really changed."

Baker's tax holiday proposal came a day after he announced he would sign into law $200 million in new fees and fines on employers to help pay for MassHealth, the state's Medicaid program, a move business groups in the state oppose.

Bill Rennie, vice president of the Retailers Association of Massachusetts, told WBUR's newscast unit that the sales tax holiday provides an economic boost to retailers and consumers.

"We've long supported it because you're incentivising consumers to spend their dollars locally here in the Massachusetts economy," he said.

Rennie's group is the same one behind a push to put a sales tax cut on the ballot in 2018. The association said Tuesday it would file petitions to reduce the state's sales tax to 5 or 4.5 percent and permanently establish an annual sales tax holiday weekend.

State Rep. Jay Kaufman, who chairs the Legislature's Joint Committee on Revenue, says sales tax holidays are bad public policy.

"I'm a longstanding opponent of sales tax holidays," he told WBUR's newscast unit. "The notion that sales tax holidays create more economic activity is just a myth."