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Four Proposed Changes to Massachusetts Taxes

By Patrick White

Massachusetts is working to put in place four significant changes in local taxes. The first is a surcharge a municipality can adopt that would add 5% to the motor vehicles excise tax. The second is a new penalty for not carrying health insurance of between $300 and $2,200 per year. The third increases the local option occupancy (hotel) tax from 6% to 7%. The fourth increases the local option restaurant tax from 0.75% to 1%.

Two are good. The other two, not so much.

1. Vehicle Surcharge: no as proposed

The state has proposed giving municipalities the option to add a 5% surcharge to the motor vehicles excise tax. I'm all for adding a surcharge to high-value vehicles. For a family trying to make ends meet who has a car valued at $20,000, however, the new surcharge amounts to $25 more on a $500 annual bill. This increases costs for everyone, not just luxury vehicles. Hard no as proposed.

2. Health Insurance Penalty: no as proposed

The state has proposed a new penalty for not carrying health insurance of between $300 and $2,200 per year. It would kick in when someone's income is $22k per year or higher. Have you tried to make ends meet on $22k per year? You can't even afford an apartment, let alone food, the car payment, or any of the myriad other expenses that go into a household budget. As the baseline for when the penalty kicks in, it is far too low. Once again, should high earners be required to pay the penalty? Sure. Those on subsistent wages? Not so fast.

There is another consideration we must grapple with: the question of federal reimbursements. Of MassHealth's $20 billion budget, 50% is covered by the federal government. The current federal administration has demonstrated its resolve to cut spending generally, especially on programs and services targeted toward the poor. This could easily result in an explosion of MassHealth and Connector Care premiums. Let's show some caution in penalizing those who may be a victim of these policies.

There has been a great deal of discussion of why we are losing population here in Massachusetts, especially among the younger generations. This is why. Stop increasing taxes on the folks whose budgets are already stressed to the breaking point. Just stop.

3. Local Hotel Tax Increase: yes

The proposed local occupancy tax change would provide municipalities with the option to adopt a higher rate, going from 6% to 7%. I strongly support this option. It would shift the burden of local taxes from homeowners to visitors. It adds revenue from a discretionary purchase, namely a vacation. On a $1,000 hotel stay, it would increase the tax from $60 to $70. Most folks dropping a grand on a hotel won't even notice the extra $10.

Using Stockbridge as an example, increasing the rooms tax to 7% would add approximately $90,000 in revenue to the town coffers, resulting in a decrease in property taxes of approximately 1%, or an average savings on the property tax bill of $60 at the median assessed home value.

4. Local Meals Tax Increase: yes

Finally, the state has proposed a local option to increase a municipality's share of restaurant tax from 0.75% to 1%. I support this change. It shifts the burden of local taxes from homeowners to folks going out to dinner, which is mostly visitors around here with local restaurant prices. For those of us who eat out for $20, it adds about 5 cents to the bill. On a $500 tab, it adds $1.25. Either way, it reduces the burden on local property taxes/homeowners. I support this initiative.

Using Stockbridge as an example, increasing the local option meals tax from 0.75% to would add approximately $23,000 in revenue to the town coffers, resulting in a decrease in property taxes of approximately 0.3%, or an average savings on the property tax bill of $20 at the median assessed home value.