Island businesses already pinched by the recession will soon have to contend with a slew of new taxes recently approved in a state budget that will boost the cost of everything from a bottle of wine at the package store to a steak dinner at restaurants.
The $27 billion state budget approved by the state legislature last month and signed by Gov. Deval Patrick Monday includes more than $1 billion in new taxes, including an increase in the sales tax from 5 to 6.25 per cent. The state also will impose a 6.25 per cent tax on retail alcohol sales, and give a local option to towns and cities to add a tax on meals and hotel rooms that would go directly back into municipal coffers.
Island voters will have the option of increasing the meals tax another .75 per cent, and raising the hotel rooms tax in their town from 4 per cent to 6 per cent. The state budget would also impose for the first time a 5 per cent tax on satellite television service to about 275,000 users across the state.
This marks the first increase in the state sales and meals tax since 1975 and ends a longstanding sales tax exemption for alcohol sold in 2,300 package stores across the state.
Some package store owners on the Island worry the tax will hurt business.
“In the long run I think it means the stores will make less. People will drink less or buy a lower grade of liquor,” said Martha Look, co-owner of Al’s Package Store in Edgartown. “Or people will just drive up to New Hampshire and buy all their alcohol there.”
Nevertheless, Mrs. Look said she understands why the state is considering the tax.
“Alcohol is, after all, a luxury item. If they have to tax something it should be an item that is not a necessity . . . I’m just glad they aren’t imposing an excise tax on the wholesale price . . . this is easier to deal with,” she said.
Cape and Islands Rep. Tim Madden supports the tax increases.
“These are hard times for everyone, and what I like about these taxes is they give local options to voters. In terms of the hotel tax, that is completely a local option that generates money for the towns,” he said. He continued:
“I don’t take these increases lightly; I know they have an impact [on consumers]. If you go too far in one direction it has a big impact. But I don’t think this goes too far. It’s a balancing act, but at the end of the day the towns have a big say in these taxes.”
But Renee Balter, former president of the Oak Bluffs Association, said an added rooms tax might drive away vacationers.
“It doesn’t sound like a lot of money, but people are being very careful with their money right now. I understand we need to raise money for the towns, but we also don’t want to drive people away. It is a bit of dilemma,” she said.