| Lawmakers raised the sales tax in 2009. Four years later, tax hikes increased the cost of gasoline and tobacco. Could 2017 be the year for the next tax hikes?
As the fiscal 2018 budget season kicked off with a revenue outlook hearing on Monday, state officials with broad power over state tax policy did not rule out tax increases, and expressed a range of perspectives on the idea.
One year ago, after listening to revenue projections from experts, House Ways and Means Chairman Brian Dempsey said tax hikes were off the table for the fiscal 2017 budget – a policy position quickly adopted by Speaker Robert DeLeo as well.
After the same hearing for the fiscal 2018 budget on Monday, where officials predicted a continuation of sluggish growth in tax revenues, the Haverhill Democrat declined to take a stand against new taxes – a stance DeLeo underlined.
“No decision has been made in terms of additional or other forms of revenue,” DeLeo told reporters. He said, “I’m not ruling out anything.”
DeLeo said he wanted to hear from others involved in the budget, and see how much tax revenue state officials expect to receive for fiscal 2018 – a decision likely to be made by Jan. 15.
“We have a lot to digest after today. And I think the first order of business is for us to go back and determine a consensus number. And I think we’re going to be spending the next couple of weeks looking at what that number would be,” Dempsey told the News Service when asked if taxes were on the table. He said, “I’m not talking about taxes today. I’m talking about what the revenue projections will be.”
Senate Ways and Means Chairwoman Karen Spilka said tax increases should be talked about in the future.
“We haven’t even gone down there,” Spilka told the News Service. She said, “That’s something that all of us will have to discuss, but that’s not something that we’re talking about now by any means.”
Gov. Charlie Baker, a Republican working with a Democrat-controlled Legislature, said he hoped to steer state policymakers away from tax increases.
“I’m going to do the best I can to talk my colleagues in the Legislature out of raising taxes. I think we need to get our budget structurally aligned and balanced,” Baker told reporters on Monday.
Lawmakers last raised taxes in 2013, hiking the cost of a gallon of gas by 3 cents and a pack of cigarettes by $1. Four years before that, in the depths of the Great Recession, lawmakers increased the sales tax to 6.25 percent, up from 5 percent.
At the revenue hearing Monday, experts’ estimates of state tax revenue growth ranged from 5.2 percent to 2.65 percent in fiscal 2018.
DeLeo, Dempsey, Spilka and Senate President Stanley Rosenberg went on record this year voting for a state constitutional amendment that would add a 4 percent surtax onto households incomes above $1 million. The goal is to raise nearly $2 billion with the intention of funding transportation and education.
That ballot amendment, which faced opposition from Republican lawmakers, needs a second favorable vote in the two-year session beginning Jan. 4 before it could appear on the 2018 ballot.
Others have discussed a potential increase in the 3.75 state excise tax on the forthcoming legalized retail sale of marijuana and subjecting online room and vacation home rentals to state taxes.
The Senate in recent years has proved more eager to revisit tax policies and raise taxes, seeking a series of changes in 2015 including new taxes on flavored tobacco. Money bills that change tax policy must originate in the House, according to the constitution.
In her opening statement at the revenue hearing, Spilka said the state had foregone nearly $600 million in revenue in the past two years because of statutorily mandated, economically triggered decreases in the income tax rate.
The Department of Revenue estimated that the income tax rate will drop from 5.1 percent to 5.05 percent on Jan. 1, 2018, resulting in an $83 million reduction in state tax collections over the second half of fiscal 2018.
