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Selling the sales tax cut - The Sun Chronicle : Local News

Selling the sales tax cut

Businesses, analysts differ on Question 3 rollback

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Posted: Monday, October 18, 2010 12:00 am

Robert Gaudette is tired of watching customers shop for wedding dresses at his South Attleboro store then drive across the border to Rhode Island to save the 6.25 percent in Massachusetts sales tax.

For a $15,000 dress, the tax savings would be $937.

"The shops in Rhode Island who sell the same dress that we do, don't have to charge any sales tax," said Gaudette. "They use that as a selling point."

So it's no surprise Gaudette supports Question 3, the voter referendum on the November ballot that would cut the state sales tax to 3 percent from the 6.25 percent levy the Legislature raised it to in August 2009.

But others, from state politicians to policy analysts warn that cutting the sales tax by more than half would add $2.5 billion to the state's looming $2 billion budget deficit.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, an independent non-profit organization, said he hasn't found anyone to tell him where cuts from state spending could be realistically made.

Widmer sees the legal obligation of the state to pay for Medicaid and education - which makes up half of state spending - as a case in point why a tax cut would inevitably be passed down to cuts from local aid.

He said that if Question 3 passes, one of the first duties of the governor in January would be to sit down and make nearly a billion in cuts to programs and services already halfway through the 2011 fiscal year.

It will become a harsh reality to many in favor of the cuts if this vote goes through, Widmer said.

"I don't think the proponents will ever learn," said Widmer. "The voters are going to pay the price."

Carla Howell from the Alliance to Roll Back Taxes said that any kind of broad-based tax cut stimulates the economy. She said last year's increase of the sales tax added incentive to proponents of the ballot question.

Howell has previous experience in campaigning for ballot questions. She supported a 1998 initiative to reduce the tax on interest and dividends and another in 2000 to reduce income tax rates.

"A ballot initiative is a very powerful tool for voters, and it's also a tool for legislatures who want to cut government waste. It's very difficult to do it any other way," she said.

Howell cites red-ink budgets and expanding pension costs as reason for reining in government costs. She calls the ballot issue a modest proposal because she believes the proposed cut would amount to a 5 percent decrease in total state spending.

"Every job created with bailouts and earmarks and patronage by politicians throws two workers out of a job in the private sector," said Howell, who claims that by eliminating the higher cost of government jobs, the tax savings could help create 33,000 jobs in the private sector.

But Michael Mazeroff, a senior fellow at the Center on Budget and Policy Priorities in Washington D.C., says claims of job creation flowing from tax cuts is unwarranted. He said the thousands of jobs lost in the public sector would negate any economic benefit from a tax cut.

"In general states cannot create jobs by cutting taxes," said Mazeroff. "The state has less to spend, that dollar loss translates to fewer jobs to people that provide jobs to state and local services."

Toby McGrath, campaign manager for the Massachusetts Coalition for Our Communities, believes a sales tax cut could reduce local aid by 12 percent - costing many municipal jobs.

"The reality is that since 2008 we have seen a 28 percent reduction to local aid to communities," McGrath said.

"I understand people are frustrated and angry and want to send a message, but it's a very costly message to our community," McGrath said.

Although earlier polling had shown support for the ballot question, a poll taken last week by Suffolk University and 7NEWS showed that sentiment is shifting. The survey of 500 Massachusetts voters found that 49 percent opposed cutting the sales tax. Another 44 percent supported the rollback and 6 percent were undecided.

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