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THINKING OUTSIDE THE BOX

Reduce the Sales Tax to 3% — Vote YES on Question 3 

 

By: Dr. Charles Ormsby – September, 2010

Why does unemployment in Massachusetts average 16% higher than unemployment in New Hampshire?

Why have so many large retail stores fled the Merrimack Valley just to be resurrected in Salem, Plaistow or Nashua? Why are the businesses that remain focused mainly on food, clothing or automobiles?

The answers are obvious as: The Massachusetts Sales Tax.

The symptoms did not just arise with the increase in the sales tax from 5% to 6.25%. These symptoms were evident before the increase, but this increase in the middle of a gut-wrenching economic downturn has seriously exacerbated the problem.

The effect of taxes on economic prosperity is not a mystery.

It is clearly visible when the economies of countries are compared. Countries that have historically low levels of taxation (if accompanied by a respect for property rights) are generally prosperous and have above average growth rates. Those with high tax rates (often accompanied by an onerous regulatory burden) typically are mired in poverty and despair with few prospects for a brighter future. When countries significantly alter tax levels, their economies respond rapidly: either expanding, if tax levies are reduced, or contracting if levies are raised.

The same effect is evident when comparing state economies. Just look at the dramatic differences in job creation when the highest tax states in the U.S. are compared to the lowest tax states. The nine states with the lowest taxes had over twice the job growth rate over the last decade as the nine states with the highest taxes.

Increasing taxes is not merely an indirect factor influencing some obscure economic statistic that somehow or other relates to the decisions of companies to close factories, to close retail outlets, or to lay off employees.

Higher taxes directly cause these results and directly impact our economic prosperity and security. Lowering taxes can reverse these effects.

Let’s just look at one, local example: The Methuen Mall (now The Loop).

Do you remember when there was a Sears at the Methuen Mall? And a Jordan Marsh? And Filene’s Basement? And more than 50 other retail outlets? Of course, the Mall took a nose dive after Sears moved (1991) to the expanded Rockingham Mall. The Mall’s final gasp high-lighted a “Sheds Unlimited” outlet; a fitting requiem for what was once a thriving retail complex.

But prosperity is a group activity. Success feeds on success. There is excitement in prosperity and commerce … just as dullness and fear accompany decline and failure. Taxes discourage commerce and block prosperity, engendering failure.

Customers shop where there is convenient access to a wide variety of goods and services. Salem, Plaistow and Nashua are thriving because they lack the extra burden of a sales tax. Our 6.25% sales tax is a huge advantage for New Hampshire businesses and a major deterrent to anyone considering locating or expanding their business in Massachusetts.

The herd has moved to where the grazing is profitable. They have left the dry hole in Massachusetts.

Yes, after more than a decade, the Methuen Mall (The Loop) came back. Now, nearly 20 years later, we are back to where we were before the sales tax induced competition from Salem emerged. Salem has exploded to ten times its size in 1990 while once-dominant Methuen has barely managed to tread water. All thanks to a 5% sales tax.

But The Loop is not what it was in 1990. It is now dominated by enterprises that sell tax-free items (groceries, clothing), or low-cost/convenience items(less than $100), or by businesses that are equivalently taxed in New Hampshire (e.g., restaurants). The Home Depot outlet in Methuen sells taxable items, but ask store management where people go for the high-ticket items – the Home Depot store in Salem.

Try to find a store on the Massachusetts side of the border that sells major appliances or 50” High Definition TVs. There are very few. Did you see the new Ultimate Electronics Store in Salem? Too bad it couldn’t consider Methuen, Lowell, Haverhill, or Lawrence for its home.

You don’t miss what you don’t see. Not only are these stores gone, along with their jobs, but gone also is the secondary economy that supports them: construction, maintenance, insurance, accounting, and on and on. Not to mention all the resultant spending from those employed that in turn supports real estate development, barbers, lawn services, painters, auto repair. All gone to New Hampshire.

More jobs lost. More opportunity stolen from your family. More prosperity denied. More economic risk and despair to deal with.

Of course, with less tax revenue derived from a growing and prosperous business community, the government beast still wants to be fed; well fed in fact. Welcome to even higher property and income tax demands.

That is why our brilliant legislators, with an excess of law degrees but no business experience, thought it wise to increase the sales tax from 5% to 6.25% and further disadvantage Massachusetts businesses and degrade the Massachusetts economy.

Their philosophy must be: If shooting yourself in the foot slows you down, try shooting yourself in the groin. Hey, why not go all in and try a shot between the eyes?

Of course, they are not that stupid. We all know that their idiocy is driven by self interest.

Taxes are the pump that transfers wealth from the private sector to the public sector. Those in the public sector like the pump; in fact, they love it. They love it so much that they promise to do everything in their power to keep those who will protect and enlarge the pump in power.

The politicians and the special interests have a deal: The politicians will work tirelessly (lying when needed) to keep the pump working and the special interests will work tirelessly (lying when needed) to keep them in office and campaigning to avoid any reduction in pumping operations.

Of course, they also agree to divvy up the loot in the form of wages, benefits, pensions, and special favors. Just like the Hole in the Wall Gang after a bank robbery, except, this time, the hole is in your wallet!

The last ballot initiative that attempted to reduce taxes (eliminate the income tax) provided a classic example. The proponents were able to raise and spend approximately $493,000 in support of the ballot initiative (100% from individual private donations; most under $100). The opponents spent over $7,575,000 (more than 15 times as much) to defeat the initiative (with 99.8% coming from special interest organizations; 60% of this from teachers’ unions and the remainder from other government unions such as AFSCME and the SEIU).

The special interests can only continue this racket if we let them. They will outspend those trying to reduce our taxes again; almost certainly by more than ten-to-one. They will tell us that reducing the sales tax will cause a plague. Children will go hungry. Teachers, police and firefighters will be laid off. Life will come to an end.

They are lying. The proof is only a few miles to your north. If New Hampshire can prosper with NO sales tax and NO income tax, why will a reduction in the sales tax to 3% be a problem?

Not only will it NOT be a problem, it will re-invigorate the economy.

It is projected to create 33,000 new jobs.

Families like yours will retain $500-$1000 in earnings every year instead of losing these earnings to the state’s bloated bureaucracy.

Businesses will have a fighting chance to compete and add jobs in the Merrimack Valley.

We can also emulate the successful New Hampshire strategy of attracting shoppers and businesses from contiguous states. With a 3% sales tax, shoppers will be attracted to Massachusetts businesses from Rhode Island (7%), Connecticut (6%), New York (7+ %), and Vermont (6%). That differential, if sustained over 5-10 years, will dramatically grow the Massachusetts economy.

State government merely needs to cut its out-of-control spending by a mere 4% with NO CUTS in local aid.

Don’t fall for the lies of the special interests … no matter how often they advertise.

Go to www.rollbacktaxes.com to help return Massachusetts to prosperity!

IN NOVEMBER, VOTE YES ON QUESTION 3.

Every tax cut is a pay increase … and a spur to economic prosperity!

Dr. Charles Ormsby

Dr. Charles Ormsby

Dr. Charles Ormsby served two terms on the North Andover School Committee, co-founded of the North Andover Taxpayers Association, is a a co-founder of and columnist for The Valley Patriot, broadcasts weekly opinion pieces for WCAP (980 AM) in Lowell, and is a faculty member in the Department of Mathematical Sciences at the University of Massachusetts Lowell. Dr. Ormsby is a graduate of Cornell and has a doctorate degree from MIT. You can email him at ccormsby@verizon.net

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