BRUNSWICK, Maine — The Maine Senate’s top Democrat said he doesn’t think Republican Gov. Paul LePage’s plan to allow municipalities to tax certain nonprofits is going to make the final cut.
Under LePage’s proposal, nonprofits with more than $500,000 worth of property could be taxed by municipalities at 50 percent of their assessed value. That is designed to make up for the eventual elimination of state revenue sharing with municipalities, part of the two-year, $6.57 billion state budget before the Legislature.
“It is a massive budget,” Senate Democratic leader Justin Alfond, D-Portland, said. “It has a lot of big proposals revolving around taxes.”
Alfond was speaking at a forum organized by state Sen. Stan Gerzofsky in Brunswick on Wednesday.
However, Alfond noted that taxing nonprofits is not a “good trade” for eliminating municipal revenue sharing.
Smaller communities may have the most to lose under LePage’s proposal, because most rural Maine communities don’t have nonprofits operating within their boundaries with property values of more than $500,000, Alfond said.
“They’ll lose revenue sharing and have no money to replace it,” Alfond said. “It doesn’t work for most of Maine.”
The plan would be detrimental to many colleges, hospitals and other organizations. If taxed, Good Shepherd Food-Bank, the state’s largest hunger relief organization, would feed 100,000 fewer people every year, Alfond said.
Bowdoin College would likely have to make up for funds out of their financial aid program, according to Rep. Mattie Daughtry, D-Brunswick.
Independence Association would have to close houses for adults with mental disabilities in order to make up for $40,000 to $50,000 in brand-new property taxes, according to Richard Estabrook, who serves on that nonprofit’s board.
Mid Coast Hospital may have a tax liability of about $450,000, according to John Moncure, an attorney who sits on the hospital’s board of directors. “It would have a dramatic impact on the free care provided to local residents,” Moncure said.
“I don’t see this proposal headed to the finish line,” Alfond said, adding that Republican legislators seem to be lukewarm to the governor’s proposal.
“By taxing nonprofits, we would be an outlier. We’d be the only state in the country that taxes nonprofits,” he added.
LePage also seeks to eliminate the state income tax while increasing the state’s sales tax to 6.5 percent by 2016, setting the lodging tax at 8 percent. Auto rental tax would drop from 10 percent to 8 percent, causing Alfond to quip, “I don’t know who the lobbyist is for the auto, but they need to get a raise.”
“A sales tax (increase) is going to hit our needy people a lot harder,” Ann Standridge of Harpswell said.
The proposal affects Maine’s most needy population in order to “give favors to those who don’t need them,” Standridge added.
“When you run a budget based on sales tax collection, it whipsaws around a lot more rapidly,” Steve Kercel of Brunswick said.
However, Chick Cicciotti of the Mid Coast Veterans Council said eliminating the income tax would encourage more veterans to come to Maine after leaving the service.
In his radio address this week, LePage said “Mainers will receive $238 million annually back in taxes and that number increases to $300 million in four years.”
Maine’s lower-income residents will receive $60 million through the state’s Sales Tax Fairness Credit and Property Tax Fairness Credit, according to LePage.
LePage will be in Brunswick on April 2 to discuss his proposed budget and proposals about taxation at an event sponsored by the Southern Midcoast Maine Chamber and Greater Freeport Chamber of Commerce.