Originally published in CommonWealth Magazine on June 18, 2022
Mass. Residents Deserve Inflation Relief
With money available, state should eliminate protectionist laws
by Jon B. Hurst, RAM President
Repeal or Suspend Minimum Markup Requirements/Below Cost Prohibitions
Dating back to the early 20th century, protectionist laws were put into place which required minimum consumer product pricing, and which prohibited certain below-cost sales. Designed to benefit the product manufacturer and distributor, as well as high-cost sellers, minimum mark ups have long been required for alcohol and tobacco products, much to the dismay of consumers of those products. Those anti-consumer laws are bad enough; but add to them even more incredible minimum pricing laws for gasoline and milk, and you have to ask yourself, who has been the priority under the law for state government? Consumers or product suppliers?
In the 21st century, consumer choice and competitive pressures should allow for loss leaders; and in these inflationary times it is irresponsible that these antiquated laws remain on the books. If a local convenience store wants to bring in more sales for a day, a week, or however long to promote themselves to consumers, why shouldn’t they be allowed to lower their prices? These laws should be immediately repealed; or at the very least suspended until inflation comes under control.
Extend the August 13-14 Sales Tax Holiday
The first sales tax holiday passed in 2004 in an economic development bill. It became a permanent event as part of the “grand bargain” in 2018, which took two labor ballot initiatives and an industry-sponsored rollback of the sales tax to 5 percent all off the ballot. One of about 18 similar events across the country, the Massachusetts consumer incentive has been particularly successful due to our border with sales tax-free New Hampshire, and the resulting recovery of sales which otherwise would leave our local economy.
Last summer Governor Baker proposed a two-month sales tax holiday. Although progressive and smart, the proposal was ill-timed due to supply chain issues. There was simply inadequate inventory on store shelves. Today, there is inventory, it just costs too much due to inflation. There is no more regressive tax than the sales tax; and, unlike the gas tax, the sales tax goes up equally with consumer price increases, thus benefiting the taxman, but hammering the taxpayer. Perhaps two months is too long; but given the damaging effects of inflation today, perhaps two days is just too short for this summer. How about a week? The state can afford it given double digit tax collection increases, and our families could use the tax relief to expand their buying power.
Make Small Business Health Insurance Fair for Main Street
One of the biggest annual cost drivers for small businesses in Massachusetts is medical inflation and double-digit health insurance premium increases. Sixteen years ago “Romneycare” passed Beacon Hill, and that health insurance reform became the model for “Obamacare” four years later. Although similar on many fronts, the laws took very different paths in supporting individual premium payers. Massachusetts put small businesses and individuals in the same risk pool (called the merged market), resulting in huge cross subsidies of individuals by employees of small businesses through premiums. The federal government kept individuals and small businesses separate, as is done in 49 states, and instead subsidized individuals’ premiums with tax dollars rather than premium dollars.
Recognizing the inconsistencies in the laws, Massachusetts negotiated with the feds a flexible “rating factor” arrangement to better balance premiums and claims, and therefore somewhat protect small employers. That was an agreement which extended for years until last summer. As of January 1, 2022, the small business rating factors went away, further contributing to double digit premium increases.
Inflation is regressive for consumers and small businesses alike. Reforming and addressing government imposed inflationary cost drivers for our families and our Main Street employers should be top of the agenda for Beacon Hill over the next six weeks.