Cities and towns could certainly use governor’s proposed tax boost
When is a tax hike not a tax hike? Well, presumably when it’s a “local option.” So after having delivered more than $1 billion in tax cuts last year, and vowing no statewide tax hikes this year, even as revenues slump, Governor Maura Healey last week proposed legislation that would lead to tax hikes estimated to cost more than $150 million a year.
She hasn’t technically broken her promise because if the Legislature agrees — and passes the Municipal Empowerment Act — the unpleasant job of hiking meals and lodging taxes and the auto excise tax will fall to local political officials and the proceeds will stay in their cities and towns.
It’s an act of political legerdemain by Healey, aimed at increasing local revenues — some of its provisions worthy, some not so much. What is disappointing is that Healey’s pledge just days earlier to give cities and towns more local control over liquor licenses seems to have already been put on a back burner.
The governor, in addition to pledging to increase unrestricted local aid by 3 percent in her fiscal 2025 budget scheduled to be released Wednesday, introduced her proposals during a speech to the Massachusetts Municipal Association. Not surprisingly they were welcomed as “a robust package of very meaningful reforms,” by MMA Executive Director Adam Chapdelaine.
The legislation would allow cities and towns to increase the local option part of the meals tax from the current 0.75 percent to 1 percent on top of the 6.25 percent that goes to the state. The local portion of the lodging tax on hotels, motels, and shortterm rentals currently capped at 6 percent (over the 5.7 percent state tax) would go to 7 percent (and from 6.5 percent to 7.5 percent in Boston).
Some 216 municipalities have adopted a local option lodging tax and 251 have adopted a local option meals tax since both were introduced in 2009. The meals tax hike could generate $58 million a year and the lodging tax hike $49 million for local governments, according to the administration.
“The reality is our municipalities generate a huge share of their revenues from the property tax, but there are also some long-standing concerns about their reliance on that,” Doug Howgate, president of the Massachusetts Taxpayers Foundation, told the editorial board. “So allowing municipalities to generate more revenue outside of the property tax makes some sense.”
Updating existing local option surtaxes is one thing, but adding a new surtax — as Healey proposes with a possible hike in the now uniform rate for the auto vehicle excise tax — is quite another. The annual tax on motor vehicles — among the most hated in the state because of its continuing nature — is levied and collected at the local level. But its rate — $25 on every $1,000 of valuation factored on a sliding scale based on its year of manufacture — has always been uniform across the state.
Now the governor’s legislation proposes a local option surtax of up to 5 percent, which the administration estimates would bring in an additional $48 million a year. In fiscal 2022 the existing tax generated $950 million for local governments. So the local option surtax on that new Honda Accord (listed at $26,000) would tack another $32.50 on top of the current $650 excise tax bill. That’s real money. And the proposal also raises the prospect of different rates being charged by, say, Boston and Brookline — as if tax avoidance isn’t already an issue. (What, you never wondered why that car with the New Hampshire plates is always in your neighbor’s driveway?)
If it’s truly essential as a revenue source, Healey should take the political heat and call for a uniform statewide rate hike, not a local option.
And the governor’s seeming reluctance to include liquor license reform in the Municipal Empowerment Act is unfortunate — especially after raising expectations at the MMA meeting. Right now most cities and towns have to go hat in hand to the Legislature every few years looking for new liquor licenses for their local bars and restaurants to keep pace with their community’s growth, as Boston has been doing — not always successfully. Now clearly some legislators — like state Representative Michael J. Moran, who told the Globe he was concerned about giving too much power to even Boston’s mayor, of whom he is a supporter — don’t relinquish their own powers readily.
On the other hand, Senate President Karen Spilka was rather supportive Monday, telling reporters, “I do have to say, with the liquor licenses, honestly, I never understood why the Legislature approves them to begin with. So I would certainly be willing to take a look at that and make some changes.”
A spokesperson for Healey, who confirmed the liquor license proposals were not in the bills filled Monday, told the Globe, “We’ll continue discussions about potential changes to our liquor licensing system. We decided to take the time needed to ensure we had the language right.”
We’ll be watching — and waiting.
The bill as filed does, however, make some worthy changes, like making permanent a number of pandemic-era policies, which have become part of the landscape and would be sorely missed if they vanished as they are scheduled to on April 1. Everything from hybrid meetings of municipal bodies that allow citizens to view the events from home to rules allowing outdoor dining and those cocktailsto-go that have added to restaurant’s bottom lines are at risk without a permanent fix.
By all accounts, the year ahead is looking to be a little leaner, a little more sober in the revenue department than the past few years, and municipalities will be feeling the pinch too. The Legislature should remove the auto excise tax from the governor’s proposal and pass the rest. A little more revenue in the cashbox and a few more tools in the municipal toolbox would surely help ease the pain.