Maine Senate approves income tax shift
poll

Maine Senate approves income tax shift


Governor concerned about measure’s effects
By Kevin Miller
BDN Staff
AUGUSTA, Maine — Lawmakers voted largely along party lines on Friday to pass a bill that reduces Maine’s income tax rate but expands the sales tax in an effort to diversify and stabilize the state’s revenue stream.

The measure’s fate remains uncertain, however. A spokesman for Gov. John Baldacci, who has expressed strong concerns about aspects of the bill, planned to meet with the Legislature’s Democratic leadership Friday evening before taking any action on the bill.

Sponsors claim the bill, LD 1088, will reduce by $55 million the overall tax burden on Mainers by collecting more revenue from tourists and out-of-staters. The average savings for most Mainers would be about $167 annually, according to supporters.

Today's Poll

Do you favor a plan to expand the sales tax to include goods & services such as movie tickets and auto repair?

Yes
No

The bill seeks to accomplish this by lowering Maine’s top income tax rate from 8.5 percent to 6.5 percent while broadening the sales tax to apply to more goods and services. The top tax bracket in Maine now kicks in before a person has earned $20,000.

At the same time, supporters claim overhauling Maine’s tax code will help avoid the boom-or-bust cycles that leave the state flush with money during good times but in deep financial trouble during economic downturns. It also will begin chipping away at the high-tax reputation that scares away prospective businesses, bill sponsors said.

“I think passage of this is an indication on the part of the majority of the Legislature that now is the time, that we really need to start doing things differently,” said Rep. John Piotti, D-Unity, the bill’s lead sponsor and House majority leader. “We cannot afford to collect our tax revenues the way we have in the past.”

But opponents countered that the proposed tax scheme is too unpredictable and that poor and elderly Mainers could end up paying more to the state. While praising attempts to reduce income taxes, critics said broadening the sales tax and increasing the meals and lodging tax could have dire consequences for small businesses struggling to stay afloat.

“I think this bill, at a different time, might have some really good policy implications but not at a time when our economy is on the verge of collapse,” Sen. David Trahan, R-Waldoboro, said during debate on the Senate floor.

The Senate voted 19-15 in support of the bill. The measure passed the House 84-54. Advocates for tax reform and financial experts say Maine’s current tax code is too reliant on income taxes and state collections from big-ticket purchases, such as cars. As a result, Maine’s General Fund takes an even harder hit when the stock market crashes — resulting in fewer capital gains taxes — and people begin buying less.

LD 1088 aims to fix that problem by expanding the 5 percent sales tax to apply to goods and services that are considered discretionary or are “exportable,” meaning popular with tourists and other out-of-state visitors. Items that would now be subject to the sales tax under LD 1088 include recreational activities, such as whitewater rafting, skiing or tickets on a whale-watching boat, movie tickets and candy. Auto mechanics, as will some other service providers, would also have to collect taxes on labor charges. The measure would also increase Maine’s meals and lodging tax from 7 percent to 8.5 percent.

“When this is done we will still have one of the most narrow sales tax bases in the country,” said Sen. Joe Perry, a Bangor Democrat who co-chairs the Legislature’s Taxation Committee.

But bill supporters were unable to convince most Republicans as well as some Democrats that the new tax plan wouldn’t increase taxes on many Mainers or put another burden on businesses. Most expressed concerns about harming Maine’s critically important tourism industry.

“I do hope it works. I do,” said Rep. Josh Tardy, a Newport Republican and House minority leader. “But I do think it makes revenue assumptions that are not correct. It’s a very dangerous time to be doing tax surgery.”

Only one Republican — Sen. Peter Mills of Skowhegan, a longtime advocate for tax reform — cast a vote in favor of the legislation, even though several Republicans had co-sponsored the original bill.

The partisan nature of the vote disappointed Piotti. He suggested that Republican leaders had not fully briefed their members about the bill based on what he said were erroneous statements from some opponents during floor speeches.

Baldacci, a Democrat, could take the partisanship of the issue into account as he weighs whether to sign, veto the bill or allow it to take effect without his signature.

David Farmer, a Baldacci spokesman, said the governor supports lowering the income tax burden but wants to see tough spending caps put in place for state and local governments. The governor, who was expected to return to Maine from Washington, D.C., late Friday afternoon, also has expressed concerns about applying the sales tax to some of the proposed areas.

“This is significant policy,” Farmer said. “It fundamentally changes the sales and income tax.”

In other tax news, the Senate voted overwhelmingly Friday to kill a proposal to impose a 5-cents-a-gallon surcharge on gas to pay for road repairs. The proposal emerged from the Transportation Committee, which is struggling to figure out how to address the growing list of infrastructure needs with shrinking tax revenues from fuel.

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Comments
50 comments on this item

Of course he does...

That's the spirit! Keep the businesses AND the tourists from wanting to come here.

The Fools, Theives, and Ne'er-do-wells of the Legislature once again vote to shaft the taxpayers to support all the gold-bricking, feather-bedding state employees.

State of Maine could save $55 million annually!?! The state of maine couldn't save 55 cents. HAHAHA ROFLMFAO. Oh my, that is so funny! Well, atleast now I am in a good mood for the weekend. L8R suckahs!

Yet another tax cut thats really a tax shift. Brilliant idea, sattle more of the states income to the sales tax which fluctuates constantly and also could have a decrease in revenue when spending decreases because these geniouses are making products and services more expensive by adding a tax to them. And i'm not sure exactly what they are going to "more broadly" spread the sales tax onto but if they add it to services provided by self employeed people what do you think those people are going to do. Thats right report less income on there tax returns or pass that cost onto their consumer which may decrease their business therefore reducing the states revenue even more . The only way to curb the deficit and help the state make money is to CUT SPENDING.

Anything that cuts the State income tax rate is a step in the right direction. Maybe that will help keep more people here instead of becoming snowbirds and taking their income out-of-state to avoid paying ANY income tax altogether! Between the everincreasing property taxes AND the skyhigh income tax, WHY would anyone think of moving here to live OR establish a business. Get with it Maine! Other states that depend on a tourist trade have tourist taxes like the one being proposed here. What is wrong with Baldacci? Just about everything.

baldy never makes up his mind until he absolutely has to.

it 's doesn't really matter if he has already has he'll switch at the last second to do what ever is the correct move for him politically. see gay marriage bill as an example.

the fall of 2010 cannot come soon enough

Business groups may be against this, but -- as long as it stays revenue neutral -- I am strongly for it. We need to decrease the volatility in the sales tax base which is particularly susceptable (sp) during recessions. Lowering the income tax is also very needed.

Bottom line is spending needs to be cut even more so we have a goverment that can sustain itself. We cannot afford the services we provide with such as small state... streamline goverment, lower all taxes ,and jobs will come back and people who want to work will have options and opportunities. This is just window dressing to set up vovers to re elect all those people back, then we will be back in same place in another year...

TOURIST ARE FED UP WITH MAINE JUST LIKE IT'S RESIDENTS!!

THIS STATE WILL BE JUST A MEMORY IN LESS THAN YEAR. THERE IS NO WAY WE CAN STRATEGICALLY COME OUT OF THIS MESS!!

COLLEGE KIDS CONTINUE TO LEAVE, RETIREES CONTINUE TO LEAVE, MIDDLE CLASS WORKING FOLKS LIKE ME WILL BE FORCED TO LEAVE!

THANKS FOR THE MEMORIES MAINE & THANKS FOR NOTHING STATE GOVERNMENT!!

'Glenna' --well said:

And/however the dirty little secret is towns have implemented a tax policy wherein they check waterfront/other property owner's residence and God Forbid you are a snowbird ( you know--no kids in school/come here to simply spend money ) --your taxes are increased -- and in some towns OFF THE SCALE.

So now, with new gas tax increase, and [above] legislation -- I, for one, will go to Montana to fish.

P.S. --'just' --GAVE- my waterfront property away---40 cents on a dollar--- I'm gone!

this is poorly written without substance, where are the facts?

CeeBlue is absolutely correct. For years, a particular downeast municipality ran a great (sorry to say) scam where folks in town effectively had one property tax rate while camp owners had another. And it worked, while the mill carried the load...but not anymore. And it's an attitude that is, sadly, often typical: "I have to live here. Those flatlanders are rich, they can afford it, so let them pay." My property tax bill has increased 50% in the last two years by "revaluation" and mil rate increases. I support my Town, but this is shady, and I'm sure it's not rare.

state of maine couldn't even save a penny... $300 million in debt (that we know of) and counting

Gov. John Baldacci always says that and then wham he signs it into law ! Gov. John Baldacci doesn't give a damn what he signs he is almost out of office.

why can't we vote this rat of a governor and legislature out

And all tax rates below 6.5% are INCREASED.

Discover our state's real tax problem at www.MaineOpenGov.org,

but we all know our current state leaders are unwilling to address their bad habits of poor management and wasteful spending.

How soon before the new Administration takes over?

Maine is a beautiful state. I was born and raised there. I cannot believe it has turned into such a liberal cesspool. Well, on second thought, that's why I left there, during the Carter administration.... if you could actually call it an administration... Obama seems to be trying to take Carters "Biggest Looser" status away so he can hang that medal around his neck. A change to poverty isn't a change I can believe in, not during the Carter "residency" or the Obama "catastrophe".

Thay are going to put sales tax on EVERYTHING ,and "IF" thay do drop the income tax rate thay will put it back up the next time thay overspend.

Do you know how much money would have to come into this state in 3 months to pay that kind of tax? If they don't get that, up goes the taxes. If they get it they'll want more because they know they can squeeze it out of you at your misery.

The Vatican, London, federal reserve, banks, BIG business's, politicans in that order is partly why things are as they are. The rest of it is people who go running to the government wanting everything "against the law", that they don't like and haven't figured out to stay away from "it"

Items that would now be subject to the sales tax under LD 1088 include recreational activities, such as whitewater rafting, skiing or tickets on a whale-watching boat, movie tickets and candy. Auto mechanics, as will some other service providers, would also have to collect taxes on labor charges. The measure would also increase Maine’s meals and lodging tax from 7 percent to 8.5 percent.

guess i won't be see any movies in the theater, i will get my movies someother way,,,,lol

SCREW YOU augusta and the horse you rode in on too.

Maine is now the state of Shame. So come visit taxland not vacationland....

Hamden 1, sorry to burst your bubble but tourists will come here to get a breath of really fresh air, sail the invigorating bays and eat the shellfish that is the freshest they can get. A point and a half sales tax will not deter them. People forget it's the conservanoids who want to destabilize the state and fed government by starving it of revenue so they can impose their taliban like religious and social view and demonize the ordinary workpeople who do the essential jobs we need to have accomplished for any kind of civil living. Rant about the administrative salaries, cut those buggers down 30%, most secretaries in departments could run the agencies better than the stale old whitye men who probably can't balance their family checkbook.

Hamden 1, sorry to burst your bubble but tourists will come here to get a breath of really fresh air, sail the invigorating bays and eat the shellfish that is the freshest they can get. A point and a half sales tax will not deter them. People forget it's the conservanoids who want to destabilize the state and fed government by starving it of revenue so they can impose their taliban like religious and social view and demonize the ordinary workpeople who do the essential jobs we need to have accomplished for any kind of civil living. Rant about the administrative salaries, cut those buggers down 30%, most secretaries in departments could run the agencies better than the stale old whitye men who probably can't balance their family checkbook.

What is amazing to me is all of the poor rednecks in Maine who buy into Conservative drivel. Useful idiots.....

To whom much is given, much is expected

-Luke 12:48

Failure to maintain a progressive income tax federally is part of what got us into the mess we're in. Shifting the tax burden from higher income earners to a sales tax shifts the burden from those who can pay to those who are least able to pay, or avoid the sales tax by shopping out of state.

The Governor is beholden to business lobby pressure etc. Although they should be seriously considered, this Governor has, from the beginning been way too deferential (to use a mild term) to special interests. In addition (as just one measure) he's one of the few that has still preferred to run a privately financed, as opposed to publicly financed, campaign.

Every time I read what the Democrats are thinking I want to go home and take a bath. I don't know if the majority of them are just corrupt or stupid too. Some time we think people evil but later we find out they are just stupid. The scary thing is they are voted in by the stupid.

I'm sure Baldacci will prove to be the Coward that he is and sign tis piece of crap bill that raises taxes on the people of Maine! AGAIN!!!

Interesting article.

I was born in Maine and lives there for 45 years, made the decision in 1999 to leave for a lower cost of living and a more predictable income for my family.

I live in a state with no personal income tax, pay 9.25% sales tax on everything including all food, beverage and labor. New auto registrations cost around $175 per year and where the cost of a kilowatt hour runs .07 vs. Maine’s .14.

Auto rental tax is around 12%, and I have seen as much as 15%. Most municipalities and counties charge local taxes on tourist activities on top of state taxes.

Yes it is a fact rural Maine municipality’s value second home property at a different standard than resident property. This ensures the “rich” non-residents and non votes contribute more to the tax coffers than the voting residents.

Maine has one of the oldest population in the country, is one of the few states continuing to loose residents on an annual basis to states with friendly personal and business tax strategies with a vision and investments in the future.

The University of Maine system is very expensive to operate (can anyone explain why Maine can afford a tenured education system) and for the most part it’s core studies remain out of touch with global needs vs. local educational needs which are few.

Governor King was the most progressive Governor to have led the State in the last 100 years (sorry Governor Curtis). King’s successful business experience brought fresh thought and innovation with a vision towards the future. The states current governor

has demonstrated he brought nothing of value to leading the state. The republican party leadership has no bragging rights either as they are the ones who gave us John McKernan. John McKernan was quit possibly was one of the worst and most self serving governors in the Maine’s history.

The fact is Maine needs new proven leadership at all levels around the state. Identify and leverage your strengths, invest and educate your children for the global economy, restructure your tax base to a user tax base and enjoy one of the prettiest states in the country.

Silencedogood

Just wondering how does putting a tax on labor to fix your car get more money from tourist? Do out of state people come here to have there cars fixed?

Public poll says no on sales tax issue four to one, watch the representatives of the people in Augusta vote yes..........................same numbers on gay marraige...........public says no, Augusta says yes. Let's get rid of these morons and get some representation of the people of Maine.

Intelligent commentary, Silencedogood.

mccojay and Joshua:

Yes, mccojay.....there is good in this state as well (altho' you would not know it to read most of the posters here). People always think the grass is greener. There are many problems in this state, yes....but other states have their share of problems too. Maybe it would be better to focus on some of the positives here and build on those....instead of all this negative ranting all the time. I mean, it is fine to point out the deficiencies, but not exclusively.

I guess those who dislike it here so much, should think of trying to live in another state if they possibly can.

Great job, now the Out of State-rs and businesses can support the Maine welfare state. I'll go to New Hampshire to shop.

Just in case the folks in Augusta missed it... its the local people that need to have their cars fixed here! Very few tourists have oil changes or tires rotated here!

Does "automotive labor" include motorcyle, boat, airplane, bicycle, 4 wheelers, camper repairs, car storage, and waste disposal?

Why not have a labor tax on window installers, lawncare companies, insulation, carpenters, house painters, driveway pavers, and chimney sweeps?

Labor charges cover the installer's expenses, insurance, hazardous waste disposal, heat, lights and feeding his family!

So guess what folks, the price of oil changes just went up!

'chersully2000'--

True story: in the last 4 weeks alone I have received 3 phone calls from] friends from ( your !) State of Maine who could not have conceived that they would ever leave what { was } Maine.

But they are.

::. 'live in another state if they possibly can' ---I would be most appreciative should you take the time to articulate what it is that you [ or anyone ] could possibly make you even think 'if you possibly can'.

Do you mean that the addiction to ' Fabulous weather' or The chance to marry a lesbian or The good feeling you get when you know your ever increasing tax burden is 'for the greater good comrade' or perhaps it the great shape you get in looking for work -- I know!--it's the mosquitos !

---: speaking from experience--the only mistake I made when deciding to leave/take my Co. out of Maine is that I did not do it sooner.

And since I have sold my last holdings in Maine- I shall not be boring you bloggers any more with my traditional values.

Last comment: if you can -- get out NOW.

God Bless

Left Maine in 1990 to find decent paying job . Dreamed that I could return one day . NO CHANCE !!!! Wacko state government totally out of touch with the needs and wants of the people

.

harryharly wrote: ""IF" thay do drop the income tax rate thay will put it back up the next time thay overspend."

.

EXCELLENT POINT!

.

Doubtless they will--so once you get used to paying more sales taxes, then you'll get back the same income tax rate or higher.

.

How does this tax cut help the fixed income people and the unemployed all this does is hurt those that cand work.

This may be the way the Democrats are getting the sales taxes that they have been trying to raise for some time. The people of Maine are like a rabbit jumping for the carrot on the end of a stick. The Dem's raise sales taxes and tell people that they are lowering income taxes! And that in the TAX Nutral. Now in two years they will raise the income taxes back up. (higher then they are now I bet) As Maine goes so does the Country, Yes right down the crapper with the people we have in charge!!

I think Maine is running out of rich folks pockets to pick if they fully tax an income of $20,000. Good God that's not even a good monthly income. I used to make that a month in Maine before Jimmy Carter came to town to kill the economy. I moved to a no state income tax state and have been living happily ever after. Going home now is very depressing because the two towns I grew up in are "ghost towns" and the potato farms are as prevalent as palm trees. It looks like a dieing civilization. But on a high note, it will make a great park!

being a life long democrate,i will never vote for one again if balldy signes this bill. thay will raise rate again next time thay overspend.NEXT YEAR

dont they think that the people that live in maine will not want to buy ski tickets or take a trip on whale watching boats. as usual we are not important. time for the state government to be relieved from their duties to the people of the state. they do not have our best interest in hand.

Why not put a labor tax on lawyer's fees? OOPs, they won't because guess who writes the law?!!! But, look how much revenue they'd collect!!!

WHY CAN'T MAINE GET HALF AS SMART AS NEW HAMPSHIRE AND DO AWAY WITH EITHER THE SALES TAX OR THE STATE INCOME TAX?

I'm with Baldacci on this one...cut and cap spending before imposing another tax, any tax!

I agree that these tax shift proposals do not seem appealing, but I can sympathize with the legislatures for wanting to find new secure resources of revenues.

We should tax a product that isnt being taxed, that wouldnt cause a uproar among its citizens.

A product that could start new industries and small businesses, and attract thousands of new tourists.

A product that grows from the earth and doesnt require harmfull pesticides and herbicides.

A product that could be regulated and taxed like alcohol.

A product that could provide millions of new revenues for the State Budget, free up our courts and prisons, and create thousands of green friendly jobs.

Decriminalize, Regulate, and tax Marijuana. It will balance the budget in no time.

The citizens of maine and the tourists that come to the state, would pay that sales tax gladly.

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