Two-month sales tax holiday may not make economic sense

THE DEBATE OVER Gov. Charlie Baker’s proposed two-month sales tax holiday has turned into a partisan, interest-driven dispute.

Baker, a Republican who has not yet announced whether he will run for reelection, portrayed the tax holiday as a way to keep more money in the hands of consumers, while helping small businesses. “We are proud to offer this proposal to keep money in the hands of taxpayers and promote economic development amidst Massachusetts’ recovery from the COVID-19 public health emergency,” Secretary of Administration and Finance Michael Heffernan said in a statement.

Businesses that would benefit from increased sales are, unsurprisingly, supportive. Retailers Association of Massachusetts president Jon Hurst, in a statement included in the governor’s press release, called it “a smart, exciting, and progressive economic incentive that will benefit our small businesses and our consumers just when they need it.”

But liberal groups panned the move as a gimmick that would divert an unexpected budget surplus away from other government spending priorities. “The tax dollars the Commonwealth would lose from this 2-month sales tax holiday could support local schools by accelerating funding for the Student Opportunity Act, provide opportunities for affordable childcare that will help businesses and families, and encourage travel by enabling transit authorities to stop collecting burdensome bus fares,” said Marie-Frances Rivera, president of the liberal-leaning Massachusetts Budget and Policy Center.

Sen. Eric Lesser, a Longmeadow Democrat widely viewed as eyeing higher office, who chairs the Legislature’s economic development committee, said businesses “need more workers and better infrastructure, not political gimmicks.” “Extra funds should be used to reduce class sizes, repair crumbling roads and bridges, improve broadband internet, or use to pay down debt,” Lesser said.

The State House News Service reported that Senate Ways and Means chair Michael Rodrigues, a Westport Democrat, also called the extended sales tax holiday a “short-term political gimmick,” while Senate President Karen Spilka was equally cool to the idea.

The presidents of the Massachusetts Teachers Association and American Federation of Teachers-Massachusetts issued a joint statement criticizing Baker for wanting to boost big box stores and online retailers instead of investing in colleges, public schools, and transportation. Merrie Najimy of the MTA and Beth Kontos of AFT Massachusetts called it “Baker’s billion-dollar giveaway.”

On one hand, the debate is coming down to the typical Republican versus Democrat dynamic, with Baker favoring lower taxes and putting more money into the hands of consumers, and Democrats wanting more government spending to shore up public infrastructure.

But largely lost in the political shuffle, points out Evan Horowitz, executive director at the nonpartisan Center for State Policy Analysis at Tufts University, is whether the move makes any sense economically. Horowitz said from an economic perspective, this is not the right time for additional stimulus. There is already a lot of stimulus money out there, distributed by the federal government. Many people have actually been saving money during the pandemic, since they had fewer activities to spend it on.

And with the economy reopening, there is already a tremendous amount of pent-up demand. Spending on clothing is way up. Spending on travel is increasing.

The increased spending is already leading to inflation. A surge in construction and home renovation projects are resulting in lumber shortages. A microchip shortage, caused by COVID-related supply chain disruptions, is making it harder to buy cars and other electronics.

Meanwhile, businesses like restaurants and hotels are struggling to hire enough workers to keep up with demand.

Horowitz said in an interview that in the long term, these problems will probably solve themselves. But in the short term, “The economy can’t take much more spending.” Trying to stimulate spending – generally the goal of a sales tax holiday – will only exacerbate the short-term problems, Horowitz said.

Horowitz said there may be ways to effectively target aid to individuals and small businesses that still need help. But the problem for many businesses is no longer a lack of people buying. “Lots of businesses are having the opposite problem,” Horowitz said. “You can’t keep up with demand.”



Atrius up-coding concerns: The Health Policy Commission veered into uncharted waters when several members of the board questioned the executive director’s decision to end a review of the proposed acquisition of the Newton-based nonprofit physician group Atrius Health by for-profit Optum of Minnesota. 

— Don Berwick chided the commission staff for failing to fully investigate reports that Optum is gobbling up physician practices around the country and using sophisticated data-gathering techniques to mine the health background of patients to build up or inflate the seriousness of their diagnoses. The practice is called up-coding — the more serious the diagnosis, the more the health care provider is paid for the treatment provided.

— David Seltz, the executive director of the commission, said the staff of the agency concluded there was no justification to launch a broader review of the acquisition because they concluded it would not significantly increase medical spending in Massachusetts or disrupt the market. Seltz also said it would be difficult tracking information on up-coding in other states.

— In 2019, the commission reviewed five years of data on the Massachusetts market and found a sharp increase in patients being discharged with high-acuity codes and patient risk scores. The researchers said it was implausible that the general population suddenly was getting sicker and concluded health care providers were massaging the diagnosis codes to increase their payments.

— Board members had never questioned a decision on a merger review in the past, and officials were a little uncertain what to do. The meeting ended with no formal decision, but it appeared Seltz was going to stand by his decision while including the board concerns in a letter summarizing the commission’s investigation to the attorney general’s office, which is still reviewing the transaction. Berwick disagreed with the decision. Read more.

Lawmakers cool to Baker spending plans: The House and Senate rejected the governor’s bid to seize control of more than half of the roughly $5 billion in federal aid the state has received, and they indicated his proposal to expand a two-day sales tax holiday into a two-month affair at a cost of $900 million in foregone tax revenue was unlikely to make much headway. Read more.

Strong support for vax mandates: Polling results show strong support among state residents for mandating vaccination of public school teachers and staff, first responders, and state employees, with about three-quarters of respondents in favor of requiring vaccinations for those groups. There is a partisan divide, however, with much stronger backing for vaccination mandates for those groups among Democrats than Republicans. Read more



Bus prescription: Transportation advocates Jeremy Mendelson, Julia Wallerce, and Arcady Goldmints-Orlov recommend five ideas for making bus service more reliable. Read more.

Utilities under fire: Rep. Natalie Blais, Sen. Jo Comerford, and Daniel Sosland of the Acadia Group say a sweetheart deal guaranteeing utilities a roughly 3 percent rate of return has to end. Read more.





A Berkshire Eagle editorial praises two businesses in West Stockbridge for working out a dispute themselves instead of going to court.

A statue honoring Susan B. Anthony is unveiled at the Adams Town Common. (Berkshire Eagle)

A community refrigerator opens in Lynn’s City Hall Square. (Daily Item)


Advocates for Holyoke Soldiers’ Home want to shift control of the home to the Department of Public Health. (MassLive)


Sen. Elizabeth Warren is slowing the confirmation of a top Education Department nominee as part of an effort to pressure the Biden administration for reform of the federal student loan system. (Boston Globe)

Rudolph Giuliani, a one-time US attorney and lawyer to former president Donald Trump, had his law license suspended by New York state officials and faces potential disbarment based on findings that he sought to mislead courts, lawmakers, and the public in pushing claims of fraud in the 2020 election. (New York Times


The Amherst Town Council voted to set up a fund to pay reparations to Black residents. It is weighing a proposal to invest an initial amount of over $200,000 and a plan for the fund is due by the end of October. (WBUR)

Food insecurity was high this past year, according to a poll of over 10,000 residents, but many families didn’t realize they were eligible for food assistance programs. (Herald News) 


A group of white and Asian parents are asking a federal court to reconsider their suit over Boston exam school admissions after revelations that Boston School Committee members exchanged texts disparaging white residents and West Roxbury residents during last year’s meeting where the committee voted to temporarily scrap the use of an entrance exam for admissions. (Boston Globe

Boston elected officials and mayoral candidates are livid over comments by state education Commissioner Jeff Riley that he might temporarily hold back $400 million of federal relief money for the city’s schools because of the recent turmoil on the Boston School Committee. (Boston Herald

After much debate and a split vote, Shrewsbury High School will keep its Colonials mascot. (Telegram & Gazette)

The Paulo Freire Social Justice Charter School in Chicopee lays off half its teachers, prompting charges that management was targeting union activists. (Daily Hampshire Gazette)


A lawsuit aiming to protect Cape Cod waters alleges that local and state officials are not addressing nitrogen pollution from septic systems that is creating an “ecological crisis” and threatening the economy. (WBUR) 

Former Worcester DA candidate Blake Rubin and a fellow defense lawyer are found not guilty of witness intimidation after a trial. (Telegram & Gazette)

A lawsuit says a Brimfield police officer, who is also a selectman, has been posting defamatory posts on Facebook and tracking the movements of two people involved in the Brimfield Flea Market. (MassLive)


St. Charles County in Missouri agreed to pay $280,000 to three journalists with Al Jazeera who were tear-gassed by police at a protest in Ferguson. (Associated Press)