Healey bill will cede some local tax control
Municipalities could raise their taxes on cars, meals, and hotel stays
Governor Maura Healey, who this week swore off raising state taxes, unveiled sweeping legislation Friday that would allow towns and cities to raise their taxes on hotel stays, cars, and meals by as much as 33 percent to help bolster their local coffers.
The sprawling bill has the backing of municipal leaders, and if embraced by the Legislature, could generate more than $150 million in new annual tax revenue for towns and cities juggling tight budgets, state officials estimated.
Healey also is seeking a series of other major changes, including allowing local officials to set caps on the number of liquor licenses distributed in their city or town, a power long-held by the Legislature. The governor said she is proposing to make permanent a raft of pandemicera rules, such as allowing restaurants to sell togo cocktails.
Speaking to reporters Friday, Healey said the package of changes “empowers the local communities” and does not affect the revenue the state relies on for its budget.
“Municipal reform is something that everybody is interested in,” she said. “We’re about helping our communities … do this easier and more efficiently and better serve residents.”
The proposals, however, immediately met headwinds on and off Beacon Hill, where Democratic and Republican lawmakers alike said they’re wary of raising taxes so soon after the state championed a $1 billion tax relief bill, and Healey herself touted the importance of affordability in her State of the Commonwealth address Wednesday.
“To come right out immediately after the State of the State [speech], to come with a tax increase, I don’t know if that’s in line with the messaging we’ve been saying for the last year,” said House Majority Leader Michael J. Moran, a Brighton Democrat. “Competitiveness is competitiveness. Whether it’s capital gains or meals tax, it’s all a tax.”
Under her new bill — summaries of which Healey’s office released Friday — most cities and towns could raise the local tax rate they charge on hotel, motel, and rental stays from 6 percent to 7 percent. That effectively would hike the levy charged for booking a hotel room by 17 percent, on top of the state’s own 5.7 percent tax.
Boston, meanwhile, could increase its local 6.5 percent levy to 7.5 percent. This fiscal year, Boston projects it will collect $124.5 million in revenue from the so-called room occupancy tax; at 7.5 percent, it could have bumped its projections by nearly $20 million. Statewide, Healey administration officials project the changes could unlock $49 million in new revenue.
Towns and cities also would be allowed to collect a 1 percent tax on meals in restaurants and local stores, up from the current 0.75 percent maximum. That means a 33 percent jump in the local tax people pay on top of the state’s sales tax and would mark the first increase to the local option since the state established it in 2009. Statewide, it could bring in $58 million more for municipalities.
Steve Clark, president and CEO of the Massachusetts Restaurant Association, said the group opposes the hike, arguing that the revenue municipalities collect from it is already rising year to year because menu prices, too, go up.
“A lot of people think of dining out as luxury but it’s a necessity for many people on a day-today basis,” he said.
In addition, Healey’s bill would create an option for cities and towns to charge an additional 5 percent on the motor vehicle excise fee residents pay, based on the vehicle’s value. The change could bring an estimated $48 million across all cities and towns.
The first-term Democrat announced the proposals during an appearance at the Massachusetts Municipal Association’s annual meeting and plans to formally file the legislation Monday, according to her office.
The bill nearly mirrors the Mass. Municipal Association’s own list of legislative priorities, said Adam Chapdelaine, the trade group’s executive director.
“It’s devolving the control to the local level, to the people who are on the ground,” Chapdelaine said. “Who knows better what the right fit is for the community?”
The proposals are notable, not only because it would mean residents could pay more for a night out or a hotel stay, but because Healey said a day prior that she would not pursue any tax or fee increases this year to help balance the state budget.
Healey has repeatedly stressed the need to tackle the high cost of living in Massachusetts and championed in her State of the Commonwealth address that “today, Massachusetts is more affordable, more competitive, more equitable than it was a year before” because of state officials’ effort.
State Representative Bradley H. Jones, the House’s minority leader, said the bid to allow cities and towns to raise their taxes “certainly doesn’t do anything to promote affordability.”
“I can go down my Main Street. This restaurant is closed, this one is talking about closing. Now we’re potentially increasing the cost of a night out,” the North Reading Republican said. “Food costs are already up.”
The bill’s other elements could have seismic effects on the local restaurant industry.
For years, towns and cities have needed legislative approval to issue any liquor licenses to restaurants and other businesses beyond a certain cap. Healey’s proposal would allow towns and cities to set their own quotas for liquor licenses, in effect bypassing the home-rule petition process under which municipalities need state sign-off on a host of policy changes, big and small.
Boston in particular has pushed for years to expand the number of liquor licenses it can distribute, arguing it would help right an imbalance that’s favored mostly white neighborhoods and give more opportunities to entrepreneurs of color in majority Black and Latino neighborhoods.
“It’s a difficult and arduous journey for us to go to the State House, begging for permission to be able to do what should be basic things,” said Boston City Council president Ruthzee Louijeune. “The biggest impact would be for our entrepreneurs, our would-be business owners.”
Whether lawmakers cede just control is unclear. Moran, the No. 2 Democrat in the House, said he personally has concerns about giving too much power over liquor licenses to the mayor of the city, even though he is a big supporter of the current mayor, Michelle Wu.
The bill would also make permanent several changes the Legislature embraced, then repeatedly extended, during the COVID-19 pandemic, including allowing restaurants to sell cocktails to go with takeout meals and allowing for expanded outdoor dining. Both policies are slated to expire April 1.
Restaurants have urged state officials to keep the to-go-cocktails option. But Healey’s proposal — as well as the one reshaping the liquor license process — drew harsh criticism from the Massachusetts Package Stores Association.
“She is going to get a fight on her hands,” said Rob Mellion, the group’s executive director. “Because these stores are just trying to survive.”
Healey announced a number of other moves Friday affecting towns and cities. She said she would seek to increase state aid to municipalities and schools in her upcoming budget, including bumping what local school districts get by $263 million.
Healey officials said her administration will also file a separate bill that would allocate $400 million over two years to cities and towns for local road and bridge work.