Tax reform plan to debut before panel next week
3/28/09 | 12 comments

Tax reform plan to debut before panel next week


Levies would shift to meals, lodging
By Kevin Miller
BDN Staff

AUGUSTA, Maine — Democratic leaders in the State House are gearing up for a major debate over tax reform next week on their proposal to collect fewer taxes from Maine residents and more from out-of-staters.

Lawmakers are considering a variety of tax-reduction measures this session dealing with everything from levies on new cars and trucks to the amount the state treasury skims from individuals’ paychecks.

At 1 p.m. Thursday, the Legislature’s Taxation Committee will hear public comments on a plan to replace Maine’s four-tier income tax structure, which has a top tax rate of 8.5 percent, with a flat tax of 6.5 percent. The bill’s authors predict that with the numerous tax credits built into the proposed system, most Mainers would pay substantially less than 6.5 percent.

Switching to a maximum rate of 6.5 percent is estimated to reduce tax revenues flowing into state coffers by about $160 million.

To cover those losses, the Democratic leadership wants to increase the meals and lodging taxes from 7 percent to 8.5 percent. The bill, LD 1088, also proposes collecting sales taxes on a host of items now exempt, ranging from tickets to amusement parks and miniature golf courses to candy purchases and car repairs.

While the proposal has received a chilly reception from some in the business and tourism industries, Rep. John Piotti, D-Unity, predicted that the net result will be Mainers paying less and visitors to the state paying more.

“The bottom line … is that with this new system, after all of the sales taxes are paid, Mainers are still going to have an additional $75 million in their pockets,” said Piotti, House majority leader and the bill’s lead sponsor.

To support that claim, Piotti’s office on Friday provided to the Bangor Daily News a number of general scenarios.

A married couple with two children earning $75,000 annually pays roughly $3,324 in income taxes. Under the new tax structure, that couple’s income taxes will drop $649. After accounting for an anticipated $130 in additional sales taxes, the couple would still save $519 annually, according to the scenario.

Likewise, a single parent who makes $25,000 and has one child would see a total tax reduction of $228 after accounting for the additional sales taxes. A single Mainer with no children earning $50,000 would see a reduction of $484, according to Piotti’s office.

“Every income group is getting a break,” Piotti said. “It’s not a huge amount of money, but it’s a step in the right direction.”

Some Republicans and business leaders disagree.

The Maine Restaurant Association, the Maine Innkeepers Association and other business groups have expressed concerns that raising taxes on goods and services sends the wrong message. Critics also contend that contrary to popular belief, it will be Mainers — not out-of-state tourists — who foot most of the bill for the additional sales taxes.

Sen. Kevin Raye, a Perry Republican and minority leader in the Senate, has serious reservations about the timing of the bill. In particular, Raye questions the logic of trying to squeeze more tax revenue out of tourists when that industry is widely regarded as critical to Maine’s economic revival.

“There is a view that the tourism industry can become a cash cow,” Raye said. “But particularly the mom-and-pop stores operating at the margin are concerned about anything that can have an impact.”

Instead, Raye said he supports a proposal by Sen. Jonathan Courtney, R-Springvale, that would require the state to earmark any excess year-end revenues above a spending cap toward tax reduction. The policy, which is modeled on a report from the Committee on Future Maine Prosperity that received overwhelming bipartisan support, would eventually lower the income tax rate to 4.5 percent.

“It’s tax relief as opposed to a tax shift,” Raye said.

Sen. Doug Smith, R-Dover-Foxcroft, has introduced his own proposal to cut in half income tax rates over the course of three years. Smith describes his bill as the first of numerous steps the state has to take to attract additional businesses. Smith acknowledged that covering the deficit created by his proposal would have to be worked out, however.

“My job as part of the loyal opposition is to try to educate, to bring the bigger issues forward and to let people know that there is a choice in this,” Smith said.

Gov. John Baldacci, a Democrat, has indicated that he would like to see some form of tax reform enacted this legislative session. Baldacci spokesman David Farmer said the governor met with Piotti this week and was impressed with the way the Democrats’ proposal has been rolled out, although he has some concerns about aspects of it.

“At this point it is still early in the process, but the governor wants to work with Representative Piotti to try to build a coalition to get things done,” Farmer said.

Most of the Legislature’s Democratic leadership, including Senate President Elizabeth “Libby” Mitchell and House Speaker Hannah Pingree, have signed onto Piotti’s bill as co-sponsors.

Democrats managed to secure House approval for a somewhat similar tax reform proposal two years ago but the measure failed in the Senate. Since then, Piotti and others, including Bangor Sen. Joseph Perry, have reworked the bill and tried to build support in both chambers.

Perry said the challenge now is building public support for the plan.

“This time we are out in front with the public letting them know what the proposal does,” Perry said. “And when they know, I think they will support it.”

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Comments
12 comments on this item
On 3/27/09 at 9:36 PM, bud55bud wrote:         Repeated separate thumbs down will cause comment to be hidden

HOW ABOUT SOME CUT BACKS IN OUR STATE GOVERMENT. PASS A LAW THAT ROLLS BACK THE SALERIES OF ANYONE MAKING MORE THEN THE GOVENOR. IF THEY FEEL THEIR WORTH MORE THEN THE GOVONER LET THEM GO TO ANOTHER STATE AND EARN IT. LET THE STATE WORKERS PAY MORE OF THEIR HEALTH INSURANCE AND RETIRMENT. TAKE AWAY THE SICK PAY HOURS BUILDUP. IF YOUR NOT SICK YOU DON'T GET IT. . FORGET HOW TO RAISE TAXES AND REMBER HOW TO SAVE TAXES. LAY OFF HALF OF THE DOT FOR THE SUMMER AND FORGET ABOUT THE MAKE WORK JOBS.

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On 3/27/09 at 10:35 PM, taxedtodeath1 wrote:         Repeated separate thumbs down will cause comment to be hidden

The tax cut proposal is a good place to start reducing the tax burden, but cuts will need to be incorported in order to maintain the budget.

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On 3/28/09 at 5:33 AM, JWBooth wrote:         Repeated separate thumbs down will cause comment to be hidden

More deceptions from the congenital liars in Augusta. Just another shift and shaft scheme where everybody will end up paying more. The fools, thieves and ne'er-do-wells of the legislature will NEVER cut the food supply to the army of parasites they've built up in state government.

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On 3/28/09 at 6:58 AM, Govt2Big wrote:         Repeated separate thumbs down will cause comment to be hidden

LD 1088 is a terrible idea for Maine residents, and I hope everyone will learn-the-facts and ask their local Senators and Representatives to Oppose it. Perhaps our Governor should cut some of his "special assistants" and help save-some-taxdollars? For example:

2007 COMPENSATION PACKAGES:

$144,026 ~Lincoln, Jane //Governor's Special Assistant // $138,808 ~Low, Ryan //Governor's Special Assistant // $131,180 ~Walsh, Jude //Governor's Special Assistant // $116,394 ~Riley, Patricia //Governor's Special Assistant // $107,879 ~Cashman, John //Governor's Special Assistant // $107,494 ~Mahoney, Michael ~Governor's Special Assistant // $103,784 ~Sklarz-Libby, Christina //Governor's Special Assistant // $102,397 ~Plummer, Sue //Governor's Special Assistant // $93,790 ~Smith, Rosemarie //Governor's Special Assistant // $93,761 ~Ende, Patrick //Governor's Special Assistant // $88,751 ~Gilbert, Mary //Governor's Special Assistant // $85,286 ~Tilberg, Karin //Governor's Special Assistant // $78,137 ~Cooney, Leighton //Governor's Special Assistant // $73,595 ~Farmer, David //Governor's Special Assistant

$73,045 ~Mullen, Lenore //Governor's Special Assistant // $72,687 ~Boucher, Lance //Governor's Special Assistant // $71,137 ~Black-Salomao, Karla //Governor's Special Assistant // $70,337 ~Arata, Kelly //Governor's Special Assistant // $69,948 ~Pelletier, Carrie //Governor's Special Assistant // $69,774 ~Hopkins, Heather //Governor's Special Assistant // $68,230 ~Saucier, Philip //Governor's Special Assistant // $64,744 ~Waterbury, Jamie //Governor's Special Assistant // $63,560 ~Leach, Joy //Governor's Special Assistant // $58,770 ~Ringel, Marianne //Governor's Special Assistant. The Waste Must Stop!

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On 3/28/09 at 7:48 AM, garysavard wrote:         Repeated separate thumbs down will cause comment to be hidden

To reduce taxes, Maine Government has to reduce spending. End of story.

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On 3/28/09 at 9:19 AM, flyfishing wrote:         Repeated separate thumbs down will cause comment to be hidden

Here we go with shift the tax burden on to the people who come into the State Of Maine to spend summer and buy Maine products. Well, I will stay home and not spend the summers in Maine if that happen's since you don't need our purchasing power at the restuarants and stores in your area.

The same people in qovt in Maine making the same stupid decisions which made me and my family retired else where instead of staying and paying their inflated taxes. I wish other Mainers could see the savings they would save by living in states who don't tax you to death and the state agencies get paid big saleries instead....

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On 3/28/09 at 10:07 AM, outlaw wrote:         Repeated separate thumbs down will cause comment to be hidden

we dont need more money we need more jobs if we build the infastructure then in time the taxes can be reduced but dont drain the pockets of the tourists or we wont have any WHAT ARE YOU LEGISLATORS THINKING or not thinking peace

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On 3/28/09 at 11:29 AM, fmrmti wrote:         Repeated separate thumbs down will cause comment to be hidden

Typical: "make the flatlanders pay!" So we make them feel unwelcome then curse them for not coming? Good thing we're not trying something new.

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On 3/28/09 at 11:43 AM, MayorMcheesy wrote:         Repeated separate thumbs down will cause comment to be hidden

last time i checked lowered or fair taxes for the masses was something the right supported? So the state purposes lower taxes and most of the people here are against it??? I dont get it

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On 3/28/09 at 2:37 PM, ParkAveJoe wrote:         Repeated separate thumbs down will cause comment to be hidden

.

It's a good idea to give an income tax break to the citizens of Maine.

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Let us visitors to the state pay extra taxes to make it up.

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Believe me, we can afford it and most won't notice being charged an extra percent or two.

.

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On 3/28/09 at 3:18 PM, movethen wrote:         Repeated separate thumbs down will cause comment to be hidden

flyfishing,

If you really added up how much extra you would pay coming here, it would not be much. I think you stated you stay at a camp or something, so where would you really pay any extra money. You will cut off your nose to spite your face. There will not be enough out of staters that think like you do, so the State will not really lose anything. Even if they did think like you, it would soon be forgotten. If I go to another state for vacation, I have no idea what extra I am spending as a tourist. Most people will not even know, let alone feel it.

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On 4/1/09 at 1:29 PM, littlejimmy wrote:         Repeated separate thumbs down will cause comment to be hidden

First, why does Augusta want to threaten or depress our #1 industry, TOURISM? The economy is in bad shape and we will most likely see less tourism revenues because of it. All Mainers will also have to pay this tax on all recreational activities(movies, restaurants, boat/snowmobile registrations, hotels, fishing/hunting licenses, sporting events, bicycles, canoes, most likely any thing recreational). As a Registerd Maine Guide that makes about $20000.00/ yr guiding, my income tax @ 8.5% is roughly $1700.00, at 6.5% it would be roughly $1300.00. Then add another 8.5% sales tax to $20000.00 and that is an additional $1700.00 bringing the grand total to $3000.00. I then have the choice of taking it out of my income, or passing it on to my clients whether they are from Maine or Away potentially losing them from the added cost, and reducing my income. I would like my Senator, Joe Perry to explain how this would be good for this Mainer.

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