Service center communities like Bangor, which often support a significant amount of jobs, infrastructure and other services for entire regions rather than just their own property taxbase, have long sought the ability to raise additional revenue through an optional local sales tax. Despite pushback from both the business community and progressives, giving cities and towns the ability to make this tax decision would empower local control and deserves strong consideration from the Legislature.
Allowing municipalities to collect local sales taxes is not revolutionary. Thirty-seven other states have some sort of local sales tax option, according to the Urban-Brookings Tax Policy Center. And importantly, this does not have to be — and shouldn’t be — a mandate here in Maine.
A bill from Democratic Rep. Pinny Beebe-Center of Rockland, for instance, would allow communities to decide on a possible local sales tax via municipal referendum. This general approach of ensuring that any local sales tax has the approval of local voters is a good one.
Lawmakers recently heard several arguments against this optional sales tax, including that it is by nature a regressive approach and has the potential to drive away tourism-related business. And while there are legitimate reasons to debate the overall effectiveness of localized sales tax increases, we believe those are questions individual communities should have a chance to consider.
The biggest question for legislators should be whether a local sales option can be tailored in a way that doesn’t violate the Maine Constitution.
Our Constitution states that “the Legislature shall never, in any manner, suspend or surrender the power of taxation.” Michael Allen, Maine’s associate commissioner for Tax Policy, urged the Legislature on behalf of the Mills administration to “establish clearly defined narrow parameters to simplify the proposals and confine the delegation of the Legislature s taxing power.” We agree. But if local sales tax can clear the constitutional hurdle, then it makes sense to explore further.
An analysis from the Maine Municipal Association, which supports an optional sales tax of no more than 1 percent, found that Bangor could generate $13.7 million in annual revenue with such a local tax. In an age of constrained revenue sharing from the state — and bipartisan support for the concept of property tax relief — cities and towns deserve an opportunity to weigh the potential benefits and drawbacks of instituting their own sales tax.
“Service center communities that attract people from a larger region for jobs, housing, retail, recreational opportunities, and social services programs are called upon to provide governmental services to a population that is much larger than their property tax base can support,” Maine Municipal Association state and federal relations director Kate Dufour explained. “In these municipalities the local option sales tax would generate some of the revenue necessary to offset the costs of providing municipal services to a daytime population that exceeds the fulltime resident population.”
The Legislature’s Taxation Committee looked at four different local sales tax bills, including the proposal from Beebe-Center. While the proposals drew some criticism from businesses owners and a wide ideological span of advocacy groups including the conservative Maine Heritage Policy Center and progressive Maine Center for Economic Policy, we have a hard time seeing why individual communities shouldn’t at least have the chance to assess the arguments involved and make their own decisions on local sales taxes.
“I would really be appreciative if you could put the trust in the people of the individual municipalities to make this decision for themselves,” the Portland Press Herald quoted Auburn’s Republican Mayor Jason Levesque as saying. “The same way you have trusted the people to elect you to the office, so I’m sure you can all agree that their judgment is fairly sound.”