Breaking News/07.30.2024
Pyrrhic victory? Biz groups blast House passage of Boston Mayor Michelle Wu’s draconian tax hike plan
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Business groups are warning of an exodus of jobs from downtown Boston and a withering blow to the city’s reeling office market after Wu’s controversial tax plan scored a crucial State House win.
On Tuesday afternoon the Massachusetts House gave a green light to Wu’s home rule petition, which would enable the city to effectively jack up commercial tax rates to head off a looming, $1 billion-plus shortfall in city revenue.
The House vote came after Wu pledged to issue an executive order to soften the impact of the tax hikes on small businesses.
Wu also promised, through the executive order, to make a modest adjustment to an expected double-digit jump in commercial tax rates, while limiting the increases to three years, down from five originally.
However, none of those changes are reflected in the home rule petition the House passed, which can’t be amended under legislative rules.
Instead, any efforts to cushion the impact of the tax plan would hinge on Wu following through on her promised executive order, which the Boston mayor would be under no formal or legal obligation to do.
As far as the up to $45 million in city aid Wu is promising to small businesses, most would not be eligible, with those with more than $5 million in revenue, or more than 50 employees, falling above the cut-off.
The reaction from business leaders was swift.
“We would all have to take a leap of faith,” said one skeptical business leader, who declined to comment on the record in the interest of candor, calling the money proposed for small businesses “political cover.”
Jim Rooney, president and CEO of the Greater Boston Chamber of Commerce, warned that Wu’s plan would set a “risky and dangerous precedent” while “exacerbating the struggles of a distressed commercial real estate sector.”
“A resilient and dynamic downtown is not created by chance, but instead demands prudent policies that strengthen the commercial real estate industry, protects businesses of all sizes, creates jobs and opportunity, and helps to grow the economy,” Rooney said in a statement.
Tamara Small, CEO of NAIOP Massachusetts, which represents developers across the state, noted that Wu’s plan comes with the office market “facing unprecedented challenges, with vacancies on the rise and an uncertain future.”
“NAIOP believes that this measure, if enacted, would be harmful to Boston's competitiveness,” Small said.
In a statement, Marty Walz, interim president of the Boston Municipal Research Bureau, thanked Wu and State Rep. Aaron Michlewitz, chair of the House Ways and Means Committee and a key legislative player, for making some concessions, but argued “these modest changes do not go as far as they should.”
The Wu administration, in turn, should consider slowing the growth in city spending, Walz said. The city budget for the current fiscal year, passed earlier this month, represents an 8 percent increase.
All eyes are now on the state Senate, which would have to agree to take up and vote on Wu’s tax plan for it to pass.
But with just a little more than a day left in the state Legislature’s two-year session - and with a mountain of other pressing, unfinished business to attend to - it’s anyone’s guess whether the Senate will vote on the Boston mayor’s plan.
Senate President Karen Spilka sounded less than enthusiastic Tuesday in comments to reporters about Wu’s tax plan.
“And as you know, any time you release a bill the day before session ends, it’s a very difficult expectation for us to hear it, especially when it has new proposals and major proposals that haven’t had the opportunity to be debated or voted on,” Spilka said, per GBH. “It sort of tells you that they’re not really serious about passing the bill to begin with.”
Privately, Spilka is concerned about the impact the tax rate hikes would have on economic competitiveness in Boston and the region, noted one business leader.
Wu, in a press statement, acknowledged the need to protect small businesses. And the Boston mayor argued that shifting even more of the tax burden onto office buildings and other commercial properties was needed to spare city homeowners from a major increase in their own bills.
Overall, cities generally have the leeway to set their own tax rates. But Wu’s proposal would involve shifting an even larger proportion of the city’s tax burden onto office building and commercial property owners than is currently allowed under state law, hence requiring legislative approval.
Meanwhile, Spilka’s words were also carefully chosen. In fact, they were the exact same words House Speaker Ron Mariano recently used to reject the Senate’s proposal to bring opioid overdose prevention sites to Massachusetts, where addicts use drugs under medical supervision.
The decision by Spilka, the Senate president, to mimic Mariano and spit the House speakers words back at him, drew chuckles from Beacon Hill insiders.
It reflects longstanding personal friction and tension between the two legislative leaders, who for a time couldn’t handle being in the same room.
It probably also doesn’t bode well for the chances of Wu’s tax plan clearing the Senate.
That said, you never know. Wu’s toxic tax plan was all but given up for dead a week ago after a State House hearing that saw lawmakers take a skeptical view of the proposal.
Wednesday is the the last day of the legislative session. And as daylight fades and late-night, backroom dealing takes over at the State House, just about anything is possible.
The reason Mayor Wu wants to shift the burden of taxes from residents to business is simple. Residents vote and businesses don’t.