In the halls of Beacon Hill, calling for affordability and competitiveness seems to be all the rage, but is the policy matching the rhetoric? During the State of the Commonwealth address, Governor Maura Healey invoked her so-called “Affordability Agenda,” a related working group, small business owners, and “real money that makes a real difference.”
But whatever the issue – taxes, healthcare, energy costs – the reality is, as always in Massachusetts, more of the same. No real relief from high taxes, no serious reduction of burdensome regulations, no improvements for beleaguered housing, energy, and health insurance markets, just rearranging deck chairs on the Titanic. A subsidy here, a regulatory modification there, but no substantive change at the end of the day.
To “follow the money” is the surest way to see lawmakers’ game, and with Beacon Hill pols it’s always tax and spend. Our state’s recent “down payment” on tax reform? Well, that now appears to be the whole payment. Those newly enacted federal tax saving measures? Massachusetts taxpayers don’t need those right away, try us again in 2027. And as for new state taxes? We’ll let the municipalities hike the Commonwealth’s levies. Easy.
Yes, “The Municipal Empowerment Act” is back. Following last year’s State of the Commonwealth address, Gov. Healey told reporters she had no plans to raise taxes due to slowing revenue collections. The following day she announced to municipal leaders that she was filing a bill to allow cities and towns to not only raise meals and lodging taxes but also create a new tax on vehicles. Fortunately, last year small businesses, restaurants, and the lodging industry reacted quickly to forestall such a misguided and unbalanced proposal, and lawmakers got cold feet.
But they haven’t given up, and legislators must be educated yet again on the dangers of local tax hikes. A recent example, rather than directly calling for cities and towns to rein in municipal spending, some policymakers instead attempted to “empower” Mayor Michelle Wu to allow Boston to further shift more of the city’s tax burden onto commercial properties. Equally troubling is a bill filed to permit the city of Salem to enact a local option 5% sales tax on top of the state’s 6.25% rate. And if one town gets the go-ahead for a local sales tax, other municipalities would follow, resulting in an 11.5% sales tax benefiting tax-free Salem, New Hampshire as consumers shop across state lines.
It’s hard to overstate how troubling this proposal is for Main Street businesses. Massachusetts’ restaurants struggled to survive during the pandemic, the shutdowns, and the soaring inflation, labor cost hikes, and worker shortages that followed. Enabling the local meals tax to be increased by a third would be stinging for restaurant owners and customers. Similarly, state tourism was also battered, and allowing further hikes in the local option hotel and lodging taxes to 7%, and to 7.5% in Boston, is plainly absurd.
Most troubling in the proposal is allowing municipalities to create a new 5% annual tax on the value of vehicles. In addition to the current excise tax of $25 per $1,000 of your vehicle’s worth, motorists would pay an extra 5% tax to generate revenue for cities and towns. Whether a restaurant delivering a pizza, a plumber driving to a home to fix pipes, a truck transporting heating oil, or a pick-up carrying equipment to mow lawns, small businesses require vehicles to conduct business. And workers across the state need cars to travel to their jobs and earn a living. This tax would be a steep burden across the Main Street economy.
Massachusetts small businesses are still dealing with another Beacon Hill tax crisis: the Commonwealth’s broken Unemployment Insurance (UI) Trust Fund. Massachusetts is consistently ranked among the worst in the nation, now 47th, for the UI taxes that replenish the trust fund. Worse still, small businesses are repaying $2.7 billion in a UI COVID assessment because our legislators only offered $500 million in federal relief money to shore up the fund, which is now projected to be insolvent and at the highest UI tax rate schedule by next year. This terrible situation was compounded by a serious state accounting error that caused employers to now have to pay back an additional $2.1 billion in UI debt to the federal government over the next decade.
Massachusetts could have used far more of its federal COVID relief funds to pay back the federal loan and replenish our UI trust fund, just as the relief money was intended and most states did. New York helped clear UI debt by providing over $7 billion. But that would have left less money for the politicians to spend and waste, just as with the new federal tax savings legislators are keen to delay for taxpayers.
With all this affordability double-speak on Beacon Hill, it’s little wonder taxpayers are attempting to place common-sense tax relief measures on the ballot this fall. Predictably, special interests are already fighting like hell to deny voters the opportunity for tax relief. Just last Sunday, Gov. Healey warned the tax reduction would be “catastrophic” and decimate funding for education. With such scaremongering, it is clear why the ballot box seems to be the only recourse for meaningful reforms, when our lawmakers refuse to lead and enact honest, smart policy.
In this year’s WalletHub “Best & Worst States to Start a Business” study, Massachusetts ranked 44th of the 50 states for business costs. On the taxpayer front, according to the U.S. Census Bureau late last month, “33,000 more people moved out of state than arrived to Massachusetts in 2025.” And on Jan. 29, Cape Cod Potato Chips announced that the popular eponymous snack will no longer be made in the Commonwealth. The Campbell’s Company is shuttering its Hyannis factory and moving production to plants in Wisconsin, North Carolina, and Pennsylvania.
Apparently, those states must have better affordability agendas and smarter policy working groups. In any case, small business owners rarely have these options. When it becomes too expensive to operate, they are forced to eliminate jobs, reduce services, and, finally, close doors.
Christopher Carlozzi is the Massachusetts State Director of the National Federation of Independent Business (NFIB), the nation’s leading small business association.
