To:        The Honorable Members of the House of Representatives

From:    Jon B. Hurst, President

Date:     April 28, 2008

RE:         Proposed Amendments to the House FY 09 Budget Recommendations

The Retailers Association of Massachusetts (RAM), established in 1910, is a statewide trade association of over 3,000 member companies.  Our membership ranges from independent “mom and pop” retailers and restaurants to larger regional and national chains.  The retail industry's contributions to the Commonwealth include over $101 billion in annual sales; $4 billion in annual sales and meals taxes; 18% of Massachusetts jobs; and operation in at least 39,000 locations across the state.

We respectfully request that you consider the following comments pertaining to the proposed amendments to the FY 09 budget recommendations of the House Committee on Ways and Means.

Amendment 43 – Local Option Meals Tax

We urge you to reject this amendment.  The members of RAM support an equal playing field with respect to the imposition of tax burdens, and favor simplicity in tax administration.  These initiatives would result in myriad tax rates and bases among the 351 Massachusetts cities and towns.  These new taxes would be regressive and would place local restaurants at a competitive disadvantage.

We are cognizant of the current financial stresses upon the Commonwealth and its communities and the need to maintain the valued services and programs provided to the public.  However, given the current economic climate we feel strongly that this is not the right path to take.  Retail sales are down.  Consumer confidence levels are at historic lows.  Massachusetts is a very high cost state in which to live and the lack of growth in our sales tax base is an indication that our residents have less and less discretionary income available, as their health care costs, energy costs and housing costs continue to soar.   Any increase in the sales tax or expansion to local option sales taxes on meals will only result in a shift of our existing consumer spending.  We must make every effort to encourage consumer spending, not to increase consumer taxes. 

We urge you to oppose Amendment 43.

Amendments 434/656 – Bottle Bill Expansion

We urge you to reject these amendments.  Any expansion of the bottle bill would be costly to both consumers and businesses who are already footing the bill for this failing program.  Comprehensive curbside recycling programs have proven to be the best option in ongoing efforts to reduce waste and increase recycling rates.  Any argument that expansion could produce additional revenues for the Commonwealth through unclaimed deposits is false, as the state would undoubtedly lose millions due to fraudulent redemption of out-of-state containers.

We urge you to oppose Amendments 434 and 656.

Amendment 472 – Prescription Drug Mandate

We ask you to support Amendment 472 which seeks to allow continued consumer choice in healthcare purchasing options and would allow consumers and employers to continue to purchase health care coverage that does not include prescription drug coverage without violating the standard for Minimum Creditable Coverage (MCC). 

Mandating drug coverage for all eliminates products now available in the market, guaranteeing further immediate cost increases for those individuals already in such products.  This standard takes a one size fits all approach and imposes it upon a very diverse population. 

RAM believes that minimum creditable coverage should be just that – the minimum necessary to qualify an individual under the individual mandate.  MCC was not meant to be a universal standard of adequacy.  Through this reform, while the Commonwealth seeks to address the issue of access for the uninsured, we must make every effort not to increase the burden on employers currently offering coverage.  Health care costs remain the number one concern for Massachusetts employers.  Requiring further expanded coverage of specific benefits, such as prescription drugs, will only make it more difficult for employers to continue to offer coverage, as the proposed standards will force many employers and their workers to purchase more expensive plans. 

No state requires that all of its residents have prescription drug coverage.  A large number of consumers rarely take prescription drugs.  Some opt to pay lower monthly premiums for their coverage and pay out-of-pocket if and when they need a medication.  Also, a number of pharmacies and retailers have begun selling generic drugs at discounted rates, providing consumers with an additional low cost option. 

We urge you to support Amendment 472.

Amendments 828 – Sales Tax Holiday

We urge you to support this amendment to bring back the Sales Tax Holiday in August 2008.  As you will recall, Massachusetts' first ever Sales Tax Holiday, held on August 14, 2004, was established in an economic stimulus package passed by the Legislature and signed into law by the Governor in November of 2003 (Chapter 141 of the Acts of 2003, Sections 55-58).  The 2005, 2006 and 2007 Holidays were weekend long two day events.  Each year, consumers have taken to the Main Street shops and stores of the Commonwealth in record numbers to take advantage of this reprieve, pumping hundreds of millions of dollars into our local economy.  Past holidays have proven to be huge successes, as consumers have overwhelmingly endorsed the economic initiative with their feet and dollars.  Shoppers and retailers alike describe the scene those days as akin to “Christmas in August.”

It is extremely important to point out that in each of the four August sales tax holidays, the total sales tax collections for the month of August surpassed the prior year, which is further evidence that the holiday creates a snow ball effect of increased sales for the remainder of the month.  Like the 2004, 2005 and 2006 sales tax holidays, sales tax collections for the entire month of August, 2007, surpassed the prior year, due to the consumer momentum created.

The overall benefits are enjoyed not only by consumers and merchants, but also restaurants, manufacturers and distribution companies and tourism destinations that cater to international guests.  In addition, tens of thousands of retail industry workers that otherwise would not be scheduled during that slow time of the year are able to earn important income.  The benefits even go to newspapers and media outlets through increased advertising buying rivaling Christmas holiday-like promotions. 

The Massachusetts Sales Tax Holiday has become the model for other states to emulate.  With retail sales down, consumer confidence levels at historic lows and the country in a recession, this initiative is all that more important this year.  Results have shown that sales tax holidays create sales that otherwise would never occur.  A full one-third of all retail purchases are impulse buys – made simply because the consumer entered the store.  In Massachusetts, we have not only picked up millions of new impulse buys but we also recover some sales that would normally go to New Hampshire, or to Internet sites.  The Sales Tax Holiday is both a welcome “thank you” to consumers and an additional incentive for them to keep investing into the economy. 

We recognize that in prior years the budget has not been the vehicle by which the Sales Tax Holiday has passed.   Given that history, we would once again urge you to support the Sales Tax Holiday in 2008, if not via this amendment, then through another vehicle at a later date.

Amendment 841 – Regulatory Impact Statements

We ask that you support Amendment 841 which seeks to protect the interests of our small businesses here in Massachusetts and ensure that those interests are taken into account during the Commonwealth's regulatory rule making process.  State regulation impacts every aspect of business activity.  This proposal would ensure awareness of rulemaking and explain the scope, need, benefit and costs of proposals to the Legislature, the public and parties who would be directly impacted.  This would improve the stability and predictability of our business environment, as well as the quality of rules and regulations promulgated in Massachusetts.

We urge you to support Amendment 841.

Amendment 1186 – Floor Tax

We urge you to support this amendment, which seeks to strike the section of the budget that establishes a “floor tax” on tobacco products already in stock. This provision is overly burdensome to the tobacco retailer, already disadvantaged by the increase in the cigarette excise tax.  This form of retroactive taxation sends an extremely negative message from the state to the retailing community and the business community as a whole.  At a time when the economy of the nation is struggling, the Commonwealth should seek to promote a stable business and tax climate.  This effort does the opposite.

We ask you to support Amendment 1186.    

Amendment 1198 – Prepaid Sales Tax

We urge you to support this amendment which seeks to eliminate from the budget those provisions to require the prepayment of sales tax by tobacco retailers.  By requiring a prepayment of the sales tax, retailers will be forced at great cost to pay additional costs up front to acquire tobacco products for sale - with the hope that those sales will come to fruition in the near future so that they may recoup that revenue.  Historically, sales tax is paid by the consumer, collected by the retailer and remitted to the state.  That is the way the system works for all consumer products, but this initiative seeks to change that.  We feel strongly that this is a bad precedent to set, especially during these dire economic times and in the face of an expected cigarette tax increase as well.

We ask that you support Amendment 1198.

On behalf of the membership of RAM, I thank you for the opportunity to comment on these very important issues and appreciate your consideration.