Republican radio address: Taxing Retirees

For the weekend of June 19-20

Greetings, this is Jonathan McKane, state representative from Newcastle.

The voters of Maine spoke convincingly on Election Day, when they repealed a tax scheme written and passed by legislative Democrats. When a People’s Veto wins by more than 60 percent, it is a landslide victory and a significant repudiation of Augusta’s entrenched elites. This marks the third time in recent years that the voters have had to repeal a law passed by the majority party. In 2008, the Democrats passed a tax on beer, wine and soda to fund the governor’s failed Dirigo Health program. The voters killed that tax as soon as they had the chance.

In 2005, the Democrats decided to borrow more than $440 million to balance the budget. The money was not meant for big projects, like new bridges or highways. It was intended merely “to keep the lights on.” A threatened People’s Veto organized by Senator Peter Mills forced them to drop their borrowing scheme and write a responsible budget. Maine voters must be getting a little tired of undoing the damage done by the majority party, which has ruled the Legislature for more than 30 years.

Fortunately, we do have the constitutional right to the People’s Veto, to rein in the kind of people who think they can keep heaping more taxes on working Maine families. The Democrats don’t like it when their landmark laws are routinely slapped down. But rather than pass laws that make sense, their instinct is to attack the People’s Veto. After the voters rejected the new tax system on June 8th, a state senator named Dennis Damon said the solution is to change the Maine Constitution so that new laws can’t be overturned immediately. Under his plan, a new law would have to be given a chance to work before a veto attempt could be made. Imagine the financial chaos if the Democrats’ new tax system had gone into effect and then been repealed by the voters a year later. To be sure, the Democrats would face a statewide revolt if they tried to strip the people’s power to repeal crazy laws. But it’s worth remembering that stripping that power was their first reaction.

Senator Damon is termed out; and the next Legislature will have an opportunity to pass a tax reform package that is fair to everyone, not just people making more than $300,000 a year.

There is one major piece of unfinished business following this most recent repeal. It concerns the meals tax imposed on senior citizens living in retirement communities and nursing homes. When we think of Maine’s 7 percent meals tax, most of us think it targets restaurant customers. Yet the state is going after meals in retirement homes, eager to extract more money from elderly folks who, in most cases, have lived here and paid taxes all their lives. Now, in their twilight years, they have to worry about Maine Revenue Services putting a bulls-eye on their lunch buffet. The retiree meals tax is of dubious legality and, in fact, has never been enforced. But Maine Revenue is trying to make up for lost time.

The tax law that voters repealed, LD 1495, would have eliminated the meals tax in retirement communities. There are 75 or 80 of these facilities around the state, places like Piper Shores in Scarborough and The Highlands in Topsham. Maine Revenue has already audited 19 of them and plans to audit them all to collect meals taxes going back six years, along with penalties and interest. Imagine paying a tax on meals eaten six years ago, perhaps by someone else.

Not even the Democrats like this tax. Last year, Senator Joe Perry introduced legislation to kill the tax outright. When it came up for a vote in the House, however, on March 17 of this year, the Democrats marched in lockstep to defeat the bill 87-55. All House Republicans voted for passage. This episode provides a window into the devious maneuvering of the majority party. They decided to defeat their own bill and then place it inside the tax reform bill. That way, they could use the retirees as leverage to defeat Question One, the vote to repeal. In effect, they held the retirees hostage to enact their tax scheme. Unfortunately for the retirees, the plan backfired.

Last week, Republican leaders formally urged Governor Baldacci to suspend the tax audits of retirement homes. In their letter, Senators Kevin Raye and David Trahan said, “At a time when pensions and retirement funds are hard hit by the economic downturn, it would be unconscionable to require residents to pay more for a service they received in the past.” The governor’s spokesman replied that the audits will move forward, but not if I can help it. I recently submitted a bill for the next session that would eliminate this unfair tax on our senior citizens.

Stay tuned as this issue plays out.

This is Jonathan McKane. Thank you for listening.