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New taxes panned by the critics

By Brian C. Mooney
Globe Staff / June 20, 2009
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John Harrington knows off the top of his head how much a proposed tax increase will raise prices on some of his best-selling products.

“Kendall-Jackson, a popular Chardonnay, is $11.95 now, so it’ll be about another 75 cents,’’ said Harrington, for more than 40 years the proprietor of Harrington Wine and Liquors in Chelmsford. “Ketel One vodka costs $38 for 1.75 liters, so it’ll cost more than a couple of bucks more for a bottle.’’

Consumers will be hit with an array of new taxes to help fund a state budget for the next fiscal year, under a plan the Legislature approved yesterday.

With the state desperate for money amid shrinking revenues, drinkers would pay a 6.25 percent tax - currently they pay nothing - on beer and wine from liquor stores. A $75 dinner tab at your favorite restaurant will cost another 94 cents, plus an additional 56 cents if your city or town elects to impose an optional local meals tax.

Boosting the sales tax from 5 to 6.25 percent would affect just about all shopping: It would add $12.50 to the cost of a $1,000 laptop computer or 50 cents to a $40 bag of fertilizer.

“We’re already in a recession,’’ said Kevin Wayne, a 39-year-old antique restorer and costume designer from Boston. “How much more can they take from the taxpayers?’’

Jim Bragg, a 55-year-old from Roxbury who works at Target, said, “They just want to get more money out of everybody.’’

But Jodi Hopkins, a 44-year-old writer from Jamaica Plain, said it was important to keep the proposed tax increases in perspective.

“Moving here from California four years ago, Massachusetts has been a bargain,’’ she said.

It is becoming less of one, though.

Planning a hotel or motel stay this summer on the Cape? A $150-a-night room would cost an additional $3 in local hotel taxes. The budget passed by the Legislature also includes a 50 percent increase in the maximum local hotel tax, from 4 percent to 6 percent, on top of the existing 5.7 percent room tax that goes to the state treasury.

The Legislature’s budget would impose, for the first time, a 5 percent tax on satellite television service to about 275,000 households in the Bay State. That would equate to $30 a year in taxes on a $50 monthly programming package.

If Governor Deval Patrick supports the legislative budget package, it would be the first increase in sales and meals taxes since 1975.

The budget would also end the sales tax exemption for alcoholic beverages sold in the state’s 2,300 package stores.

The Legislature approved the tax increases despite a vigorous lobbying campaign by the various trade associations that are affected. The focus now shifts to Patrick.

“We will ask the governor to veto this unfair tax,’’ said Andrew Reinsdorf, vice president for government relations of DirecTV, the largest satellite TV service provider.

Reinsdorf said 44 other states tax satellite and cable providers equally or not at all. Cable companies, which dominate the pay television market in Massachusetts, pay local franchise fees, but their services are not subject to a state tax.

Owners of the 14,000 restaurants in the state opposed not only the general increase in the meals tax, from 5 percent to 6.25 percent, but also the introduction of an optional 0.75 percent local meals tax on top of the state’s share. In effect, they lost a fight that began on Beacon Hill about seven years ago.

“The meals tax is a real emotional issue for restaurateurs, and they are very opposed to local option taxes, period,’’ said Peter Christie, chief executive of the Massachusetts Restaurant Association. “It’s not just the three-quarters of a percent tax; it’s that once they cut you loose from the pack, the municipalities will be back next year and the year after that, looking for more.’’

Christie cites as an example the local-option hotel tax, now being increased for the first time since it was introduced in 1985. Last year, 91 of the state’s 351 communities collected $97 million by assessing the maximum rate allowed. Boston took in almost $10.1 million of the total, followed by Cambridge at $1.8 million.

The restaurant business is already struggling mightily in this recession, Christie said, and the tax will impose another burden. Sales in May were down 4 percent from the prior year, he said.

For small business owners such as Harrington, whose Chelmsford store is about 8 miles from the state line, the lure of sales-tax-free New Hampshire and its state-run liquor monopoly is ominous. “This is going to be devastating’’ for businesses on the Massachusetts side of the border, he said.

“The more taxes you throw on something, the more it makes it worthwhile to drive up to New Hampshire,’’ Harrington continued. “Cigarettes? That business is gone. Now, you’re doing liquor. What’s next, gasoline?’’

Globe correspondent Jenna Nierstedt contributed to this report.