With the Commonwealth suddenly finding itself flush with a multi-billion dollar surplus, Governor Charlie Baker has proposed a two-month sales tax holiday at an estimated cost of $900 million.
Needless to say, there are plenty of long-term investments that should be prioritized over a short-term gimmick like a sales tax holiday, and many have listed out the important educational or infrastructure investments that could be made by using either the $900 million Baker is proposing here, or a larger piece of the state’s surplus.
It’s also overwhelmingly clear from economic evidence that sales tax holidays don’t do anything to contribute to long-run economic growth, instead taking purchases that would have been made over a longer timeframe and condensing them into the window. Even conservative economists and advocacy groups like ALEC have panned these holidays, saying a far better idea for long-run support for businesses and taxpayers is to just permanently lower the tax rate, even by a little bit.
But I’m going to take at face value that the idea here is to create some sort of immediate benefit and relief for people in the wake of COVID-19 (rather than this being a mere publicity stunt that Baker or Polito can stick on a campaign ad next year or use as a cudgel against opponents, since sales tax holidays are the kind of thing that poll great even though just about any unbiased analysis shows is bad policy).
As immediate ‘COVID relief’ or ‘help for residents and businesses who just went through a tough time,’ this is also a lousy proposal. Sales of durable goods – things like electronics and furniture, for instance -are what spike the most during sales tax holidays; those kinds of products have hardly been impacted by the pandemic in any negative way.
Sales tax relief worth an average of $66 per month per Massachusetts resident isn’t nothing, but it’s also not much, compared to what could be done – especially considering the distribution of that $66 per month will be skewed toward people who make more expensive purchases more often. Bear in mind that food and clothing are already exempt from sales taxes in Massachusetts, and the largest cost-burden on struggling Massachusetts families – housing costs – are also not impacted by sales taxes.
Here is a partial list of things that could be done with $900 million that would provide more immediate, short-term value to Massachusetts residents than a sales tax gimmick. Bear in mind, many of these aren’t exactly optimal policy either (we should be using this money to make long-deferred investments in our future – striking while the iron is hot). But they’d all be better ideas than a sales tax holiday!
-Eliminating all user fees, parking fees, etc. from all Department of Conservation and Recreation parks and properties for the next 5 years, while also doubling its budget
Ever since the 2008 economic crisis, there has been a squeeze on the budget of environmental agencies like the Department of Conservation and Recreation. As such, there has been an increasing push for DCR to generate more revenue to cover its costs (even though public parks, beaches, pools, and recreation facilities are supposed to be public services and not businesses).
This is why you’ve seen entrance fees at state parks increase, parking meters pop up along DCR parks and beaches (hello Revere), and increasing fees for things like public skate rentals and other recreational programming predominantly used by working-class people in Massachusetts who don’t have access to their own private amenities.
For significantly less than the cost of a two-month sales tax gimmick, the state could double the DCR’s budget for the next 5 years (source) while also eliminating all user fees, parking fees, etc. at all of the state’s beaches and parks. Imagine the kinds of investments the state could make in making all of our public parks and beaches glistening, gleaming, modern facilities with a doubling of its budget – while also keeping them fully free and open to all.
-Make all MBTA fares and parking at MBTA stations free for the next year
The MBTA projected collecting a total of $693 million in fares and $44.5 million in parking revenue in FY20. This means that for the cost of a two-month sales tax holiday, we could make the MBTA entirely free to all users on all modes – bus, subway, or commuter rail – for the entire year, and then still have $170 million left over. We could also eliminate the cost of parking at all stations during that period of time.
With insane traffic congestion returning to Boston’s streets even before much of its white-collar workforce is back working in person, a one-year elimination of fares and parking costs would send a loud and clear message to commuters and those heading into the city for recreation that taking the T is the way to go- which would be great for the environment in addition to reducing congestion.
From an equity standpoint, the vast majority of the people who have continued to use the T all throughout the pandemic are the much-lionized essential workers – often low-wage workers who had to continue going in each day even through COVID’s peaks. Such workers have seen the cost of MBTA fares increase by 220-300% since 1994. A monthly bus pass costs $55 a month, so a year of free fares would mean savings of $660 for some of the poorest blue-collar commuters in the state.
-Make the entire UMass system completely tuition- and fee-free next year (and then some)
The entire UMass system collected $917 million in tuition in FY20 across all of its branches. This means that you could theoretically just neatly and cleanly offer a one-year tuition jubilee and be done with it – but realistically, you could probably do even better than that. The financial report doesn’t break down how much of this tuition revenue comes from out-of-state students, but it’s fair to assume it’s at least a good chunk, with 5,000+ out-of-state undergrads at UMass-Amherst alone paying higher tuition than in-state students.
All of this is to say, making tuition completely free across the entire UMass system for a full year for MA residents would almost certainly leave enough money to also do the same across all community colleges, too.
This would provide an immediate and significant boost to the educational aspirations of many working-class Massachusetts families while also providing the long-run benefit of reducing debt burdens on future UMass grads.
-Mail a $900 check to every Massachusetts household making under $70,000 per year
An estimated 1,072,970 households in Massachusetts – a little over 40% – make under $70,000 per year. This means you could send each of those households $838 for less than the cost of a tax holiday that would save them on average ~$132. This would provide immediate relief to people who work in service industries that saw the biggest impact on their bottom line during COVID.
-Send a $1,200 check to every Massachusetts household with children
There are an estimated 742,000 households with children in Massachusetts, meaning that with no income means-test at all we could send every single one of them $1,212 for the cost of the Governor’s sales tax holiday proposal.
If those checks were targeted to kids in poverty, we could send out over $4,000 per kid in poverty per 2016 data.
-Completely eliminate all fees at the RMV for an entire year
Annoying fees to renew your licenses and such at the RMV are a fact of life for everyone, with a special burden on low-income people (who also face even larger time and transportation obstacles toward being able to navigate the RMV in the first place).
The RMV collects an estimated $600+ million per year in license and registration fees. We could make them all free for an entire year – and still have $300 million to spare. Wouldn’t that be a load off so many families?
-Triple the amount spent on the emergency food program for the next 15 years
The amount of money spent on the state’s food bank program in the four years pre-COVID was about $17 million per year. We could set up a trust fund that ensures that this funding will be tripled every year for the next 15 years, working to ensure no family in Massachusetts goes to bed hungry, for less than the cost of a two-month tax holiday.
-Quadruple the Youth Summer Jobs budget for the next 15 years
Summer jobs for at-risk youth is one of the most proven strategies for reducing juvenile delinquency, keeping youth out of trouble, and putting them on a path to success. From 2016-19 around $11 million per year was budgeted for the youth summer jobs program.
We could set up a fund that ensures this budget will be quadrupled for the next 15 years instead of enacting a tax holiday.
-Double the earned income tax credit in Massachusetts for the next three years
Massachusetts budgeted $283.9 million toward the Earned Income Tax Credit program within the state, which allows MA taxpayers a refundable credit against MA tax equal to 30% of the amount of the federal EITC. We could spend the next three years DOUBLING what has been demonstrated to be an anti-poverty tool embraced across the political spectrum.
-Triple rental vouchers for the next three years
The Legislature recommended a $125 million budget for rental assistance vouchers in FY2021, thankfully increasing it from the Governor’s request for $113 million. These vouchers help the most at-risk elders and low-income families who are navigating the Massachusetts rental market, many of whom were the most impacted by COVID’s public health and economic impact. We could triple this program for the next three years, dramatically expanding the amount of help that can be given to those who might otherwise be on the brink of homelessness.
–Quintuple funding for the Massachusetts Cultural council for the next 10 years
Some of the most devastated sectors of the economy during the COVID-19 crisis were areas like the arts, music, and tourism. Many who relied on live gigs and travelers to make a living had a rough go of it – not only hurting the economy, but hurting the state’s cultural vitality.
The Legislature appropriated $18 million to the Mass Cultural Council in FY2021, which is used to support community arts and cultural facilities, museums and festivals, family-friendly programming, and other similar pursuits.
A quintupling of the budget could help create jobs and promote vitality in arts, music, and culture, while supporting the revival of an industry heavily impacted by COVID-19.
-Eliminate all license fees paid by MA businesses for the next three years+
The Corporations Division of the Secretary of the Commonwealth’s office collects about $264 million per year in licenses and fees – such as the fees for initially incorporating in Massachusetts, annual renewal fees, and the like.
It costs $275 to file your articles of organization, $25 every time you appoint or change a registered agent, $12+ for certificates of your legal existence, and more. Then add in things like trademark and service mark registration fees. It starts to add up!
These could be completely eliminated for three years, reducing unnecessary hassle and burden on MA-operated businesses.
-Pay two years worth of rent for every homeless veteran in Massachusetts, then mail every veteran regardless of income a check worth $2,600
Massachusetts has an estimated 917 homeless veterans, supported by veterans shelters around the state. The cost of two years of rent an average cost of $1,600 per month would be $35.2 million to house every single homeless veteran in Massachusetts for two years. Then with the rest of the $865 million we would have spent on a sales tax gimmick we could mail a $2,600 “thank you” check to all 328,000 military veterans in Massachusetts (including the now newly-housed, to help them with additional living expenses).
If you look through the budget you’ll see many more valuable examples of what we could do with the money, but it would require leadership that isn’t short-sighted or in thrall to the most influential corporate lobbying groups on Beacon Hill. Let’s hope we see leadership get creative about how to utilize this once-in-a-generation opportunity to invest in the Commonwealth. My hope with this exercise wasn’t to push any one of these particular ideas as the best one, but demonstrate that there’s really something for anyone across the ideological spectrum that would be more immediately beneficial to Massachusetts residents than a sales tax jubilee.