Thursday, July 23, 2009

Economic stimulus - Massachusetts style

There is an increasingly prevalent theme to the radio ads that I hear during my commute this week.

I ought to buy a new Toyota before August 1, when the Massachusetts sales tax is 'set to increase by twenty-five percent!' Ernie Boch tells me, in his Ernie Boch way.

Now is a great time to get myself a Seeley Posturepedic, but I'd better hurry to 'beat the Massachusetts sales tax hike!'

Bernie and Phyl remind me that they always have low, low prices - but their prices won't be quite so low after August 1, when the 25 percent sales tax increase goes into effect. So I'd better get myself in to pick up a comfy recliner with built-in cup holders now, before the price goes up.

One after another, retailers admonish me to do the smart thing and make my purchases this week, before they are forced to raise prices. It is the perfect kind of 'sale' for the seller: they do not have to actually reduce prices, just make us understand that the price this week is considerably lower than it will be next week.

Call it economic stimulus - Massachusetts style. Spur spending not by injecting capital into the marketplace, but by threat of a certain increase in cost in the near future.

Here's a prediction. Look for consumer activity - and therefore tax revenue - in the state to spike in July. When those numbers come out there will be much back-slapping and self-congratulation on Beacon Hill. All will ignore the inconvenient fact that the revenue improvement will register before the effective date of the tax increase. Then look for consumer activity and tax revenues to tank again in August. When they do, you will not hear a single Democrat in the State House discussing the real, obvious reason: the disincentive to spending created by the tax increase, coupled with front-loading of consumer activity in July to 'beat the Massachusetts sales tax hike.'


  1. I just purchased an entire house worth of sales tax at all for Massachusetts.

  2. Ron, Shewsbury, MA.
    Although the new alcohol sales tax doesn't start until Sat 8/1, I'm heading to NH today and stocking up! I'll make sure and fill my tank and pick up all my other tax free items too.
    It's one thing to have an increase on items currently taxed, but completely outrageous to now include alcohol.


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