Massachusetts is among the states hungrily eyeing the potential tax windfall it would get if big Internet retailers like Amazon were forced to apply state sales taxes to its merchandise.
We agree with Peabody Mayor Ted Bettencourt, Salem Mayor Kim Driscoll and the state's Democratic leaders that it's a matter of "Main Street fairness." But we also think they should take it a step further to help both consumers and downtown businesses.
Right now, the Internet is largely a tax-free zone. Big companies like Amazon are able to operate enormous warehouses in out-of-state locations, and can ship their items wherever they want without having to charge a sales tax.
That places traditional brick-and-mortar businesses at a big disadvantage. Here in Massachusetts, those businesses are forced to tack on an additional 6.25 percent to pay the state's sales tax. It's particularly hurtful in border towns, where customers are drawn to New Hampshire and its "tax free" shopping. But it has an effect elsewhere, as well. Salem residents who used to enjoy the Cornerstone Books store, for example, might remember the struggling retailer's newsletter comments about people who browsed through his store to find the books they wanted, then left and ordered those books from Amazon because it was cheaper. (Cornerstones went out of business in 2010.)
Many local retailers have joined an effort called the Main Street Fairness Coalition, co-chaired by Mayor Driscoll, in an attempt to pressure state leaders to get Amazon to start paying taxes.
State leaders such as Gov. Deval Patrick like the idea, but here's the rub.
Top policymakers like state Treasurer Steve Grossman would love to take that estimated $339 million in new money and use it for new spending on transportation and various other needs.
We think it would be wiser to take that new revenue and use it to drop the sales tax rate. After all, aren't we talking about saving "Main Street?" And since customers who use the Internet will have to pay more, dropping the rate for everyone will ease that pain a bit.
Massachusetts residents may recall it was just a few years ago that state lawmakers jacked up the sales tax rate from 5 percent to 6.25 percent, in response to a fiscal crisis. The crisis is gone, but the state is hanging onto that 6.25 percent rate. It's like prying honey from a bear; the state just won't let it go. What's going to happen when the next fiscal crisis arrives?
More importantly, the sales tax is a regressive one — it hurts poorer people more — so it's not a great way for the state to make money in the first place. Keeping it modest is in everyone's best interest; if the state needs more money, the more equitable tax is the income tax.
There's a reason local mayors are helping to lead the charge here. Downtown businesses create jobs, produce tax revenue and stimulate other business activity, all while lifting some of the tax burden off of homeowners' shoulders. Beverly and Peabody are both in the midst of efforts to encourage people to live in their downtowns, as a way to boost retail businesses and create more interesting, livable communities. Salem's vibrant downtown has been a long time in the making, and helping those businesses thrive is in everyone's best interest.
So yes, go ahead and tax Amazon. But take that money and use it to give Main Street a double boost — use it to lower the state's artificially high sales tax rate. Give the people who have the courage to invest in our downtowns a better chance at success.