BOSTON — Gov. Maura Healey slipped a series of tax increases into her fiscal year 2026 budget like applying the sales tax to candy, slapping the tobacco tax on synthetic nicotine products, and imposing an excise tax on complimentary hotel rooms.

The proposals drew quick scrutiny from conservatives and business organizations who argued the climate for companies in Massachusetts is already less than ideal and customers are being lost to other states in New England like New Hampshire.

The first-term Democrat’s budget also amounts to a 7.4% increase in overall spending compared to the fiscal year 2025 plan she signed into law last summer — a jump Healey and her top deputies did not acknowledge during their budget rollout Wednesday.

As Massachusetts faces constrained tax revenue growth, Healey moved to make a series of budget cuts to balance her spending proposal and put forward a slew of tax policies that could ultimately provide hundreds of millions in new revenues for the state.

Rep. Todd Smola, a Warren Republican who served as the top conservative on the House budget-writing committee during the last legislative session, said the governor’s budget proposal included a “hell of a lot of taxes.”

“I’m not so sure how those proposals are going to fly when they start getting reviewed as part of the legislative process but we’ll see how that plays out,” Smola told the Herald Thursday. “We know this stuff doesn’t stay as is from day one. We call the governor’s budget the DOA budget because it goes through an aggressive process in both the House and the Senate. So we’re going to pick those issues apart very, very carefully.”

Taxing candy sales

Among Healey’s tax policy changes is an effort to apply the sales tax to candy purchases, a shift the governor said could generate $25 million for Massachusetts.

She argued the policy change “isn’t about a new tax.”

“What this is doing is simply saying, when you go to the grocery store, instead of having candy treated like a purchase of bread and eggs and milk, you know, essential groceries, that candy is now going to be treated in the same way as when you go to the bakery, the back of the grocery store and pick up cupcakes for your kids. We think that makes sense,” she said Wednesday.

In a budget briefing document, the Healey administration said it is “critical” that their tax decisions align with general policy opinions. In this instance, officials said, incentivizing “the purchase of candy does not align with our public health goals, especially for our youth.”

Retailers Association of Massachusetts President Jon Hurst said his organization is “concerned” about consumption and consumer taxes.

“You can put a new tax or raise a tax on consumers here in Massachusetts, (but) that doesn’t mean that they’re going to pay it, particularly when you’re in a region like New England and you have New Hampshire just right over the border,” Hurst said. “Tens of billions of dollars in consumer sales go to New Hampshire each and every year driven by tax policy and this kind of thing is what New Hampshire loves.”

Charitable donation deduction cap

The governor proposed capping charitable donation deductions at $10,000 for joint filers and $5,000 for individual filers instead of leaving the option uncapped, a recommendation her budget writers said could yield the state $164 million.

Massachusetts Taxpayers Foundation President Doug Howgate said officials need to consider whether the tax credit is an “appropriate” tool to leave uncapped and what impact it would have on creating a competitive tax system.

“The other thing I think we’ll be looking at is what kind of impact will this have on the nonprofit sector, right? If I no longer get the same tax benefit for giving my money to organization ‘X,’ will I give less?” Howgate said.

Healey said people have had the benefit of a federal tax deduction and only in 2023 did residents in Massachusetts have the ability to claim a state charitable donation credit.

“We’re not getting rid of that. In fact, most states, or at least half the states, if not the majority of states in New England, don’t offer a state charitable deduction. We do, and that will continue,” she said. “The states that do offer that deduction don’t offer it to the degree that we offer it. So we just think it’s important to continue with that deduction and also to make sure that we’re doing so in a way that’s going to be most effective.”

Capping the deduction, she argued, will not change people’s appetite for donating to charities.

Healey targets complimentary hotel rooms, synthetic nicotine

In a move aimed at the hospitality industry, the Healey administration wants to impose the room occupancy excise tax on the fair market value of complimentary hotel rooms. If approved, the policy could generate $4 million in revenue, according to state officials.

The Arlington Democrat is also looking to subject synthetic nicotine products like ZYN pouches to the same excise tax as tobacco products, which is projected to bring in $2 million in revenue, according to the Healey administration.

Massachusetts Fiscal Alliance spokesman Paul Craney said the state has shown a trend of banning or implementing “really high taxes on all sorts of nicotine products.”

“The result is you’re just going to get more black market products and more shopping in New Hampshire,” Craney said in an interview. “I think Massachusetts is going to that well way too often at this point … so I would really caution against trying to go after that industry yet again.”

Local option municipal taxes

Administration and Finance Secretary Matthew Gorzkowicz said the governor plans to refile legislation next week that previously tried to give cities and towns the option to hike taxes on hotel stays and meals.

Healey’s top budget writer did not say whether the administration planned to ask the Legislature to consider the exact same proposal from last session — which ultimately sputtered out — or if the policy proposal would change.

The bill from last year also pitched a new 5% local option motor vehicle excise surcharge, or a fee charged by every city and town on vehicles registered in their communities based on the vehicle’s value.

At the time she filed the bill, Healey said the proposal, dubbed the “Municipal Empowerment Act,” would give cities and towns “the support and resources they need to build strong communities and grow their economies.”

But Christopher Carlozzi, Massachusetts state director for the National Federation of Independent Businesses, said higher taxes on meals and hotels would make Massachusetts less competitive, especially when neighboring states are trying to siphon away tourism dollars.

“When we make it more expensive to spend recreation time in Massachusetts, we make it harder to attract people into the state,” Carlozzi told the Herald. “Massachusetts hotels, Massachusetts restaurants, who have been through a lot over the last five years through COVID and beyond, they don’t need anything else to hold them back.”

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