Who doesn’t enjoy a break? The day you abandon the healthful diet, skip mowing the overgrown lawn and forgo exercising in favor of having a few beers can be a nice change of pace. But the next morning you pay, if not with an actual hangover, at least with all the same problems, returning with a vengeance.
A proposed sales tax holiday has all the earmarks of a consequences-free day off, but it comes with a $6 million hangover. That’s the amount of money the state will lose in sales tax revenue. The idea proposed in LD 1148 is to eliminate Maine’s 5 percent sales tax during the three-day Columbus Day weekend in October. The tax exemption would cover items less than $2,500, and exclude tobacco and a few other things.
Although some supporters, including primary sponsor Rep. Meredith Strang-Burgess, R-Cumberland, may sincerely believe this will boost economic activity, it smacks of the most cynical sort of pandering. Any legislator who has been around the block on the budget knows this is a hollow, feel-good, bread-and-circus bone being tossed to voters. Veterans of the recently concluded budget process know that finding $6 million to plug the revenue hole created by this gimmick will be difficult at best.
The tax holiday proposal won approval in an initial vote in the House of Representatives, probably because members anticipated the “unfriendly to business and consumers” tag they would face in their re-election campaigns if they opposed the measure.
Proponents are hailing it as a lifeline to Maine’s retail businesses, but in reality, consumers will probably delay purchases in the weeks before the holiday, so sales records will show a slight dip, followed by increased purchases on the Columbus Day weekend, followed by a slight dip. Analysis of retail sales after states dropped their ban on Sunday shopping showed the same sort of results, with the same volume spread over seven days.
The last time Maine faced a recession-related revenue crisis, in 1991, Republican Gov. John McKernan approved of a temporary increase in the sales tax and the expansion of that tax to include snack food. Cutting off sales tax revenue at this time is not responsible. Rep. Emily Cain, D-Orono, said she has been asking colleagues, “If you had $6 million, is this where you would put it?” instead of higher education, mental health care and other worthy activities that were short-funded.
What is especially vexing is that a well thought-out plan to reform Maine’s tax structure, LD 1088, which actually would reduce income taxes on most Mainers, is facing an uphill battle for passage. That plan would increase taxes on nonresidents, thereby easing it on residents.
The sales tax holiday proposal aims to sweeten Maine’s attraction for Canadians for whom the weekend is their Thanksgiving. This is backward; rather than give them a free pass, these visitors should pay the same sales tax Mainers pay.
Maine’s retail businesses, like other sectors, are facing hard times. But a sales tax holiday is more of a boon to legislators’ resumes than to stores’ bottom lines.