Richard Tisei: Sales tax increase will hurt business

By SEN. RICHARD R. TISEI
Richard R. Tisei is the minority leader of the Massachusetts State Senate.
May 28, 2009 6:00 AM

Massachusetts businesses are already struggling with one of the worst economic recessions since the Great Depression. Now it looks like they're in for another blow, after the House and Senate voted to increase the state sales tax by 25 percent.

The proposal to raise the sales tax from 5 percent to 6.25 percent could not have come at a worse time. Unemployment is on the rise, many longtime businesses are either closing or moving out of state, and consumers are cutting back on discretionary spending.

Coming on the heels of a half-billion-dollar corporate tax increase in January, the sales tax proposal represents yet another setback to business owners who are trying to keep their heads above water against a rising tide of red ink and declining sales. Increasing the sales tax practically guarantees consumers will head to New Hampshire or use the Internet to avoid paying the tax.

The National Federation of Independent Businesses, the Retailers Association of Massachusetts, and many other business organizations have come out strongly against the sales tax increase, saying it will hurt employers, particularly small "mom and pop" operations. Those concerns are reinforced by an April 2009 Beacon Hill Institute analysis, which warns that "an increase would ripple through the state's economy, destroying jobs and income, and shifting sales out of state, all the while making the state less competitive."

A look at the monthly Business Confidence Index compiled by Associated Industries of Massachusetts (AIM) shows that business confidence in the commonwealth remains at historically low levels. The April survey score of 35.4 is up slightly from the all-time low score of 33.3 recorded in February, but far short of the 50.1 registered in April of last year.

In a recent survey of its members, AIM found that 42 percent had reduced their employee work hours, and 46 percent had already laid off workers or were preparing to do so. Fifty-five percent of the companies surveyed had frozen salaries for 2009, while 86 percent had "altered staffing plans" — and that's without factoring in a sales tax increase.

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