Governor Charlie Baker’s proposal for a two-month sales tax holiday this year might be just what the doctor ordered.
Massachusetts typically offers a two-day holiday in which purchases by individuals of most retail items up to $2,500 are exempted from the 6.25 percent sales tax. There are some persuasive arguments to expand it this year to two months.
Topping the list is the obvious one: We are coming out of a time in our history unlike any other.
The financial hardship that has befallen retail businesses is unthinkable. Many businesses closed their doors; others had to downsize their operations; and because of COVID restrictions many consumers turned to online shopping for their purchases. All these factors hurt the retail and hospitality sectors significantly. While government programs helped businesses keep employees on the payroll, that assistance was not geared toward bringing people back into stores.
A longer tax-free period may be the impetus to get people used to shopping in person again, and provide merchants much-needed foot traffic.
I was a CPA for many years before launching our IT firm. Through my current work with CPA client firms and membership in the Massachusetts Society of CPAs, I have a good window into the trends in the accounting field and the overall state of the economy.
The extended sales-tax holiday would be a strong economic stimulus addressing two problems we are still struggling to fix: getting consumers used to shopping in person, and giving our businesses a strong competitive advantage.
Anyone who has ever traveled to New Hampshire has probably experienced the ribbing some Granite Staters like to direct at Massachusetts for offering only two sales tax-free days a year when they have 365.
Recent state figures show Massachusetts tax revenues are nearly 15 percent above the year-to-date projection. The “Rainy Day Fund” is also expected to reach $4.4 million, higher than before the health crisis.
This suggests that the state is in good financial shape. So why not help our merchants and consumers at the same time?
A far from ordinary year deserves a far from ordinary solution. And if it works, maybe we could consider it for future years.