Gov. Maura Healey slipped a sequence of tax will increase into her fiscal yr 2026 price range like making use of the gross sales tax to sweet, slapping the tobacco tax on artificial nicotine merchandise, and imposing an excise tax on complimentary resort rooms.
The proposals drew fast scrutiny from conservatives and enterprise organizations who argued the local weather for firms in Massachusetts is already lower than excellent and prospects are being misplaced to different states in New England like New Hampshire.
The primary-term Democrat’s price range additionally quantities to a 7.4% enhance in general spending in comparison with the fiscal yr 2025 plan she signed into regulation final summer season — a bounce Healey and her prime deputies didn’t acknowledge throughout their price range rollout Wednesday.
As Massachusetts faces constrained tax income progress, Healey moved to make a sequence of price range cuts to stability her spending proposal and put ahead a slew of tax insurance policies that might finally present a whole lot of tens of millions in new revenues for the state.
Rep. Todd Smola, a Warren Republican who served as the highest conservative on the Home budget-writing committee over the past legislative session, stated the governor’s price range proposal included a “hell of a lot of taxes.”
“I’m not so sure how those proposals are going to fly when they start getting reviewed as part of the legislative process but we’ll see how that plays out,” Smola instructed the Herald Thursday. “We know this stuff doesn’t stay as is from day one. We call the governor’s budget the DOA budget because it goes through an aggressive process in both the House and the Senate. So we’re going to pick those issues apart very, very carefully.”
Taxing sweet gross sales
Amongst Healey’s tax coverage adjustments is an effort to use the gross sales tax to sweet purchases, a shift the governor stated might generate $25 million for Massachusetts.
She argued the coverage change “isn’t about a new tax.”
“What this is doing is simply saying, when you go to the grocery store, instead of having candy treated like a purchase of bread and eggs and milk, you know, essential groceries, that candy is now going to be treated in the same way as when you go to the bakery, the back of the grocery store and pick up cupcakes for your kids. We think that makes sense,” she stated Wednesday.
In a price range briefing doc, the Healey administration stated it’s “critical” that their tax selections align with common coverage opinions. On this occasion, officers stated, incentivizing “the purchase of candy does not align with our public health goals, especially for our youth.”
Retailers Affiliation of Massachusetts President Jon Hurst stated his group is “concerned” about consumption and shopper taxes.
“You can put a new tax or raise a tax on consumers here in Massachusetts, (but) that doesn’t mean that they’re going to pay it, particularly when you’re in a region like New England and you have New Hampshire just right over the border,” Hurst stated. “Tens of billions of dollars in consumer sales go to New Hampshire each and every year driven by tax policy and this kind of thing is what New Hampshire loves.”
Charitable donation deduction cap
The governor proposed capping charitable donation deductions at $10,000 for joint filers and $5,000 for particular person filers as a substitute of leaving the choice uncapped, a suggestion her price range writers stated might yield the state $164 million.
Massachusetts Taxpayers Basis President Doug Howgate stated officers want to think about whether or not the tax credit score is an “appropriate” device to depart uncapped and what influence it might have on making a aggressive tax system.
“The other thing I think we’ll be looking at is what kind of impact will this have on the nonprofit sector, right? If I no longer get the same tax benefit for giving my money to organization ‘X,’ will I give less?” Howgate stated.
Healey stated folks have had the good thing about a federal tax deduction and solely in 2023 did residents in Massachusetts have the flexibility to assert a state charitable donation credit score.
“We’re not getting rid of that. In fact, most states, or at least half the states, if not the majority of states in New England, don’t offer a state charitable deduction. We do, and that will continue,” she stated. “The states that do offer that deduction don’t offer it to the degree that we offer it. So we just think it’s important to continue with that deduction and also to make sure that we’re doing so in a way that’s going to be most effective.”
Capping the deduction, she argued, won’t change folks’s urge for food for donating to charities.
Healey targets complimentary resort rooms, artificial nicotine
In a transfer aimed on the hospitality business, the Healey administration desires to impose the room occupancy excise tax on the honest market worth of complimentary resort rooms. If permitted, the coverage might generate $4 million in income, based on state officers.
The Arlington Democrat can be seeking to topic artificial nicotine merchandise like ZYN pouches to the identical excise tax as tobacco merchandise, which is projected to usher in $2 million in income, based on the Healey administration.
Massachusetts Fiscal Alliance spokesman Paul Craney stated the state has proven a pattern of banning or implementing “really high taxes on all sorts of nicotine products.”
“The result is you’re just going to get more black market products and more shopping in New Hampshire,” Craney stated in an interview. “I think Massachusetts is going to that well way too often at this point … so I would really caution against trying to go after that industry yet again.”
Native choice municipal taxes
Administration and Finance Secretary Matthew Gorzkowicz stated the governor plans to refile laws subsequent week that beforehand tried to offer cities and cities the choice to hike taxes on resort stays and meals.
Healey’s prime price range author didn’t say whether or not the administration deliberate to ask the Legislature to think about the very same proposal from final session — which finally sputtered out — or if the coverage proposal would change.
The invoice from final yr additionally pitched a brand new 5% native choice motorcar excise surcharge, or a payment charged by each metropolis and city on automobiles registered of their communities primarily based on the car’s worth.
On the time she filed the invoice, Healey stated the proposal, dubbed the “Municipal Empowerment Act,” would give cities and cities “the support and resources they need to build strong communities and grow their economies.”
However Christopher Carlozzi, Massachusetts state director for the Nationwide Federation of Impartial Companies, stated greater taxes on meals and inns would make Massachusetts much less aggressive, particularly when neighboring states try to siphon away tourism {dollars}.
“When we make it more expensive to spend recreation time in Massachusetts, we make it harder to attract people into the state,” Carlozzi instructed the Herald. “Massachusetts hotels, Massachusetts restaurants, who have been through a lot over the last five years through COVID and beyond, they don’t need anything else to hold them back.”
