Maine lawmakers question governor's tax proposals
3/1/09 | 13 comments
state house

Maine lawmakers question governor's tax proposals


By Mal Leary
Capitol News Service

AUGUSTA, Maine — Members of two legislative committees are questioning proposals that would step up enforcement of certain tax laws and change the way Maine implements some taxes.

Gov. John Baldacci’s administration made the proposals as part of the governor’s biennial budget plan.

“These have been before us before, some just last year, and were rejected by the Legislature,” said Sen. Richard Nass, R-Acton, a member of the Taxation Committee. “I have a problem with these tax policy questions coming forward in the budget.”

Lawmakers heard criticism of proposals to change the way some tobacco products are taxed, the way the state estate tax is figured, the way telecommunications property is taxed, and the way the state corporate income tax is assessed.

“This is commonly called ‘throw out,’” said Joe Crosby of Cumberland, representing the Council on State Taxation, a national group representing more than 600 large corporations. “Throw out is highly unusual; it is only used by two states.”

“Throw out” is an income tax assessed on a business for money made in another state that does not tax that income. The two states using this tax are New Jersey and West Virginia.

More importantly, he said, the methodology is being challenged as unconstitutional with a case expected to be heard by the U.S. Supreme Court this spring. He said the state would be making a mistake to adopt the method that has yet to be vetted by the high court.

“This also discourages investment in a state,” he said. “Maine can’t afford to do that.”

The proposal is estimated to generate a little more than $5 million over the two-year budget.

Lawmakers also were told the telecommunication tax itself could face a constitutional challenge over the way it is imposed. That was raised by telephone company representatives upset at the tax rate increase proposed for the two years of the budget. It is estimated to raise $3 million, with most of that paid by FairPoint Communications.

On another proposal, Nass said, “the estate tax was one of the most debated last year, and the Legislature rejected it and yet it is back here again.”

Finance Commissioner Ryan Low told Nass it would be short-sighted not to look a proposals that have been rejected in the past, saying it is done all of the time at the State House.

“After all, we don’t do that with legislation,” he said. “There are a lot of proposals back this year that have been defeated in the past.”

Jerome Gerard, acting director of Maine Revenue Services, said after the debate last year the agency was urged to continue to review the issue. He said new data on federal audits of estate taxes prompted the agency to propose the change and ask for additional staff to audit estate tax returns. Maine exempts the first million dollars of an estate, so there are relatively few that are subject to tax in the first place.

“The big complaint was that the federal government would be auditing returns, so why should the state,” he said. “We average between 400 and 500 taxable estates a year, and the IRS on average audits no more than 12 a year.”

Gerard said the two agents assigned to estate tax collection are generating from $1.5 million to $1.9 million a year by auditing tax returns. He said the language change would allow the state to audit estates even when they are accepted by the IRS, and is estimated to generate about $2.3 million in the first year and $39.5 million in the second year of the budget.

Sen. Richard Rosen, R-Bucksport, also criticized the portion of the proposal that would include taxation on any gifts made for three years before a person’s death.

“I object to this being called a loophole,” he said. “This is a change in policy that needs to be debated and discussed.”

Lawmakers also questioned the hiring of additional agents and the funding for overtime for other agents to collect taxes. Rep. David Webster, D-Freeport, said he wanted to see more information on how the state knows there is a tax collection problem and where more agents will improve collections.

“The more criminal work we do, the more and more we find,” Gerard said. He said a recent prosecution of a single tax preparer found more than $3 million in taxes due by the preparer and his clients.

He is proposing adding two criminal agents to the five now employed at the agency. He said the agents would cost about $340,000 and would bring in more than $1 million in additional revenues.

Gerard also is proposing about $500,000 in overtime for collections agents at the agency. He said working some evenings and weekends have proved successful in contacting taxpayers that owe the state money.

He also said the estimates do not take into account any increase in cases that may occur as the result of the recession.

“We have a backlog of cases now, “he said.

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Comments
13 comments on this item
On 3/2/09 at 5:05 AM, captain_obvious wrote:         Repeated separate thumbs down will cause comment to be hidden

its time to stop "questioning" tax proposals

and impeach spaghettihead

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On 3/2/09 at 5:52 AM, BobByn wrote:         Repeated separate thumbs down will cause comment to be hidden

Do we still have to pay the new $35 motor vehicle registration fee if we're getting all that stimulus money? Car ownership in Maine is truly a luxury - becoming impossible for many.

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On 3/2/09 at 7:38 AM, downbeat wrote:         Repeated separate thumbs down will cause comment to be hidden

We are currently a Welfare state. Anyone with estates larger than 1,000,000 have been changing residency to Florida and other states as soon as they retire. We cannot be a welfare state anymore and we cannot be all things to all people. We need to stop looking a goverment and start succeeding on our own...We need to stop complaining and start finding ways to solve our own problems...

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On 3/2/09 at 8:02 AM, sickntired wrote:         Repeated separate thumbs down will cause comment to be hidden

They sit in Augusta day in and day out doing nothing except trying to figure new ways to squeeze money out of the people of this state. I propose we just send them all our money and let them send back whatever they think is enough to get by on. Because that is all we get anyway. It is about time to clean out that nest of snakes up there and start over. If the people had any balls they would get together go up there and toss em out on the toe of their boots.

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On 3/2/09 at 8:22 AM, Scintillate wrote:         Repeated separate thumbs down will cause comment to be hidden

It's really going some, up taxing again like this will teach the government to budget? When will they start taxing baby's for presents from the tooth fairy, Santa Claus and the Easter bunny? I'm almost to a point if it's taxed I don't need it and I have completely stopped donating money or anything to charities partly because someone who doesn't work ,in my neighborhood just bought land moved in a new house and are on welfare. When welfare can afford to buy a new house and I can't after working 50 hours aweek or more ,clearly the government is screwing us Isn't rape against the law?

Going on your last sentence Sickntired, where can I sign the petition?

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On 3/2/09 at 8:38 AM, Philster wrote:         Repeated separate thumbs down will cause comment to be hidden

I remember when the state was in the liquor business and the state was averaging $28 million net revenue to the general fund. Then the state leased out the liquor business for 10 years for $125 million plus a small commission which was $5.5 million for 2008. Lets do the math: $125 million over 10 years is $12.5 million a year which is less than $28 million a year. But wait. The state got the $125 million 5 years ago so only $5.5 million went into the general fund for 2008 which is much less than the $28 million a year the state was getting. At the legislative hearings the "big wigs" said the state would save millions a year.After 5 years, I am till waiting for the first penny savings.

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On 3/2/09 at 9:40 AM, LarrySG wrote:         Repeated separate thumbs down will cause comment to be hidden

A 'Throw out tax" would be self-defeating; it would cost more to defend and fight legal battles than it would ever bring out. It's flat out a bad idea. These are really just feel good gimmicks to make it look like the Governor and his highly overpaid staff (and none have been laid off) look good.

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On 3/2/09 at 9:42 AM, hankwilliams wrote:         Repeated separate thumbs down will cause comment to be hidden

Most drivers don't know how heavily subsidized the car culture is. The BAT system needs new buses. There's nothing wrong with taxing car owners to help pay for them. Why is it free to park at the Mall when it costs two bucks to get there and back on the bus? Where's the incentive to get out of the car and thereby reduce carbon emissions and traffic congestion? All shoppers, whether they drive or not, are paying for the parking lot. How come we can't get socialized medicine in this country, but we've already got socialized parking?

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On 3/2/09 at 11:09 AM, NotNaive wrote:         Repeated separate thumbs down will cause comment to be hidden

We have the ability to elect the right people... but this state continues to vote in the Democrats. Who votes D in the Welfare State??? The welfare bunch. Why? Because the D's continue to throw money at them. Then the D's throw money at eachother's pet projects...not unlike Beth Edmond's redundant online library worth hundred's of thousands (she's a librarian, btw)... Do you really want a Governor who pays his special assistants $140,000+ per year... all 100+ of them? I guess so, because here we are again, with this idiot lounging in the Mansion. Stop voting Dem across the board. It really is as easy as that.

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On 3/2/09 at 1:12 PM, Focus541 wrote:         Repeated separate thumbs down will cause comment to be hidden

Hmmmmm...Hank, I am pretty sure those parking lots you speak of are owned by a private entity and were put there so people will be able to park their vehicles and access their businesses. I really don't see how 'every' driver pays for that parking lot. The correct statement should be that every shopper pays for that parking lot. And everyone has the freedom to either take a bus; or work hard, save money, and buy a car to travel instead of using public transport. So you really can't say that folks who use public transportation are paying an unfair share...if they want to buy a car and use the parking lot, they are free to do so!! Why do the so-called 'environmental minded' people want everyone to cram onto a bus as a 'solution' for the expanding carbon emmissions problem? It's a played-out, old idea. A more realistic solution is to build more fuel efficient, less-pollting vehicles that run on natural gas, hydrogen, and electricty (or a combination). Once you have given someone the freedom of a personal automobile, don't expect to take that freedom away without a fight. And by the way, which do you think does more damage to an asphault roadway over time, a fully loaded bus that could weigh 20 tons or more; or a lightweight, personal vehicle that weighs less than one ton? We need new technology and new approaches, not the tired, old ideas of the past.

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On 3/2/09 at 2:15 PM, rock wrote:         Repeated separate thumbs down will cause comment to be hidden

I AGREE WITH NOT NAIVE --- WHY NOT ELECT INDEPENDENT BUSINESSMEN AS LAWMAKERS AS THEY USUALLY KNOW HOW TO HANDLE MONEY BETTER THAN LAWYERS

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On 3/2/09 at 6:16 PM, taxedtodeath1 wrote: Click here to view hidden comment         Repeated separate thumbs down will cause comment to be hidden
On 3/2/09 at 8:51 PM, Beelzebubba wrote:         Repeated separate thumbs down will cause comment to be hidden

F#@k Maine. I'm gonna sign up for food stamps, fuel assistance, etc., etc.

I will pay no more taxes to this corrupt regime!

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