Eight New Taxes in Massachusetts Coming At You From Beacon Hill

Printed from: https://newbostonpost.com/2019/01/27/eight-new-taxes-in-massachusetts-coming-at-you-from-beacon-hill/

At least eight new taxes have appeared on Beacon Hill recently, either as proposals or (in one case) enacted policy.

Most have appeared in public during the past month or so, since around mid-December 2018.

Here’s a rundown, along with arguments for and against:


1.  Airbnb Tax

Status:  Law enacted (takes effect July 1, 2019)

Amount:  Maximum 17.95 percent, but less outside major cities and Cape Cod

Governor Baker signed into law on Friday, December 28, 2018 a bill taxing short-term housing rentals through services such as Airbnb (House Bill 4841 of the 2017-2018 legislative session).

Details (from the Massachusetts state government web site):

—  5 percent tax to the state from the new statute
—  0.7 percent “uncodified” surtax to the state
—  6 percent maximum to the local municipal government (except for Boston, where the ceiling is 6.5 percent)
—  3 percent maximum community impact fee to the local municipal government
—  2.75 finance fee for convention center debt payoff (only in Boston, Cambridge, Worcester, Springfield, West Springfield, Chicopee
—  2.75 percent for homes on Cape Cod, Martha’s Vineyard, and Nantucket for the Cape Cod and Islands Water Protection Fund

Justification:  Levels playing field between Airbnb (which had been paying no tax) and hotels that are already paying taxes to the state; raises revenue for government (which governor projects at $28 million for the state)

Criticism:  Visiting Massachusetts is about to get more expensive, and property owners who rent to visitors may take a hit


2.  Deeds Excise Tax Increase

Status:  Proposal; bill filed

Governor Charlie Baker proposed on Friday, January 18, 2019 an increase in the state excise tax on deed transfers, which is a tax on real estate sales.

Amounts (from the governor’s press office):

—  from $2 per $500 now to $3 per $500 everywhere except Cape Cod, an increase of 50 percent (from 0.4 percent to 0.6 percent)

—  from $1.50 per $500 now to $2.50 per $500 (or from 0.3 percent to 0.5 percent) in Barnstable County, which covers Cape Cod

Justification:  Would provide money to make infrastructure improvements to address possible flooding if global warming raises sea levels

Criticism:  Buying and selling property in already-high-priced Massachusetts would get more expensive


3.  Millionaires’ Tax

Status:  Proposal; bill filed

Two state legislators filed legislation on Friday, January 25, 2019 to begin the process to try to amend the Massachusetts Constitution to allow a 4 percent surtax on individual residents who earn $1 million or more per year. (The surtax would be on top of the flat-tax rate, which is currently 5.05 percent.)

The two legislators sponsoring the so-called Fair Share Amendment are state Senator Jason Lewis (D-Winchester) and state Representative James O’Day (D-West Boylston), according to the Woburn Daily Times Chronicle.

A version of the proposed amendment got shot down by the Massachusetts Supreme Judicial Court on June 18, 2018, less than five months before it was scheduled to go to the voters as a referendum in the November 2018 general election, because income tax and the stated purposes for the money in the referendum (transportation and education) failed the standard in the state constitution for a ballot question, which allows a referendum to ask voters to approve only items “which are related or which are mutually dependent.”

But a new version that avoids that problem might survive judicial review, and eventually make it to the statewide general election ballot in November 2022.

Justification:  Supporters project the millionaire’s surtax would raise $2 billion for government services like public education and roads and bridges, and they argue that it’s fairer than the current flat income tax.

Criticism:  If high earners in Massachusetts people avoid the tax by establishing residency elsewhere, it wouldn’t raise as much money as projected by supporters, and if high earners flee the state, it could hurt the state’s economy. Some supporters of flat taxes also think they’re fairer than graduated taxes because everybody pays the same rate.


4.  Vaping Tax

Status:  Proposal; bill filed

Governor Charlie Baker proposed on Friday, January 18, 2019 to extend current state excise taxes on tobacco to e-cigarettes and vapor products.

The current state excise tax on cigarettes is $3.51 per pack of 20 cigarettes, and more than that if a pack has more cigarettes, according to the Massachusetts state government web site.

Justification:  Vaping may not be as health-neutral as supporters said when it first became available on the market, so discouraging it through taxation may make sense to improve health. The tax would also raise money for the state government (about $6 million, according to the governor’s projection).

Criticism:  It may not make sense to tax a product that may be less harmful than traditional cigarettes at the same rate as traditional cigarettes. Also:  Taxes on any type of cigarette or (faux-cigarette) products tend to hit poor people hardest, since poor people use them more than middle-class and rich people do.


5.  Opioids Tax

Status:  Proposal; bill filed

Governor Charlie Baker proposed on Wednesday, January 23, 2019 a 15 percent sales tax on opioids.

Justification:  Opioid addiction is a major problem in Massachusetts. Addicts need help, which costs money. The governor projects about $14 million in revenue from his proposed 15 percent tax on opioids, which would help pay for the $266 million in treatment and related services (including nearly $50 million through MassHealth for poor people) that he proposes in the state budget for fiscal year 2020 (which begins July 1, 2019).

Criticism:  A tax on opioids will make painkillers that some patients need more expensive, and may therefore increase costs of legitimate health care. It also might make state government a kind of business partner in the sale of a questionable product, as high state taxes on tobacco and marijuana currently do.


6.  Uber and Lyft Tax Increase

Status:  Proposal; bill filed

Massachusetts currently taxes ride-sharing trips at 20 cents apiece.

Three state legislators have filed a bill that would increase the state tax to 6.25 percent (the current sales tax). The tax would be less than that — 4.25 percent — for shared trips, meaning for more than one person.

For a $10 ride, the tax would increase from 20 cents currently to 62.5 cents, an increase of 212.5 percent. (The percentage increase would be less for a cheaper trip, more for a more expensive trip.)

The three state legislators sponsoring the bill are state Senator Brendan Crighton (D-Lynn), state Representative Jay Livingstone (D-Back Bay), and state Representative Adrian Madaro (D-East Boston). The bill is supported by the Metropolitan Area Planning Council, a government agency that provides planning for 101 towns and cities in the Boston area.

Justification:  Supporters of increasing taxes on Uber and Lyft sharply say it would promote walking and using public transportation. They also like the idea of raising more revenue for municipal government (which gets a cut of the current 20-cents-per-ride tax) and for public infrastructure for pedestrians, bicyclists, and charging electric cars, as well as for an existing fund designed to help the taxi industry, which has been hit hard by the onset of Uber and Lyft. The smaller tax increase on so-called shared trips is designed to encourage carpooling to decrease traffic congestion – though it, too, would be much higher than the current tax on Uber and Lyft, at 42.5 cents a 112.5 percent increase over the current 20 cents for a $10 trip.

Criticism:  A massive percentage tax increase on ride-sharing services would make getting around in Massachusetts much more expensive and might hurt Uber and Lyft drivers, and perhaps decrease their availability if they weren’t making as much in aggregate as they are now. That might hurt mobility and the economy.


7.  Internet Sales Tax

Status:  Supposed to be collected now, some haggling over details

The Massachusetts Department of Revenue is trying to collect the state’s 6.25 percent sales tax retroactively on online sales made through the Internet, in the wake of a decision by the U.S. Supreme Court on June 21, 2018 allowing the practice (in South Dakota v. Wayfair Inc.).

The Massachusetts revenue department wants taxes going back October 2017, when the revenue department issued a regulation saying it would begin collecting taxes on online sales.

Six online retailers sued the state revenue department in Suffolk Superior Court in Boston in December 2018, saying the demand for retroactive taxes is illegal.

What will happen to back taxes? That’s for state courts to decide.

But current and future online sales? Pay up.

Justification:  So called brick-and-mortar retailers have long argued that online companies have an unfair advantage over them because they can avoid passing on sales taxes to their customers, unlike traditional stores. In addition, the state government can at least theoretically collect more revenue if more retailers have to fork over sales tax.

Criticism:  More widespread sales taxes mean prices will go up and commerce may go down, hurting consumers, online retailers, and the economy.


8.  Carbon Tax

Several Massachusetts state officials (including the governor and Attorney General Maura Healey) have said recently they support aggressively trying to reduce the amount of carbon used by Massachusetts residents. Taxing carbon and using the money for low-carbon-emitting methods of propulsion is one way to do it. How much isn’t clear at this point.

A 74-page report from the state’s Commission on the Future of Transportation released in December 2018 calls for the state to participate in a regional effort to sharply limit the allowable use of carbon and “require transportation fuel distributors to purchase emission allowances sold in regional auctions from within those limits, and use the funds generated from these allowance sales to invest in clean transportation and other pressing transportation needs.”

Similarly, if Massachusetts adopted “allowance auction prices” for “purchasing credits generated by clean fuel providers (such as electricity and renewable fuels)” similar to what California is doing now, the report says, it would generate $500 million in revenue for the state “and cost the average driver $7 per month.”

Justification:  Climate change is harmful to the point of emergency and is caused by mankind’s use of carbon-emitting fuels like oil, natural gas, and coal. Limiting carbon emissions by government rule would decrease the amount of greenhouse gases causing global warming and therefore decrease possible flooding from currently projected increases in sea levels from the melting of ice at the North Pole. Promoting electric cars and generation of electricity from wind and the sun (and any other methods) would decrease the use of carbon-emitting fuels, and is well worth the cost of transitioning, whatever it is.

Criticism:  Climate change isn’t caused primarily by human activity, isn’t all bad, and can’t be stopped by cutting out carbon emissions. Forcibly switching from proven market commodities like oil and natural gas to proven money-losing ventures like solar and wind power would cause economic disruption and decline. Centralized planning of economies didn’t work in Marxist countries and won’t work when it comes to fuel production and use.