Taxation
Committee endorses improved tax reform bill
Feedback from citizens, businesses result in enhanced version of tax
reform package
June 1, 2009
Augusta, ME—The Maine Legislature’s Committee on Taxation
reviewed and endorsed the comprehensive tax reform package put forth
by members of the Taxation Committee, the presiding officers of the Maine
House and Senate and other legislators. The package, which was introduced
in March and had a public hearing in April, is a wholesale revision of
the tax code in order to put Maine in a better position to grow the state’s
economy and reduce the tax burden on residents. The Taxation Committee
refined the bill and supported a slightly modified and improved version
of the legislation after receiving input from the public hearing and
community forums around the state.
The tax relief and reform package will cut the top income tax rate from
8.5 to 6.5 percent and pay for it by expanding the sales tax base to
a number of highly exportable and discretionary items.
“This tax reform package is the right policy at the right time
for the state,” said House Majority Leader John Piotti, D-Unity. “This
plan allows us to spur economic development by lowering the income tax
rate, stabilize state revenues, and reduce the tax burden on Maine people
by having non-residents pay a larger share, as they do in most other
states. This legislation will put us in a much better position for economic
recovery, and I think the changes the Committee made will make it an
even better package.”
The plan is “revenue neutral,” meaning Maine state government
will not raise any more money from it, but will collect revenues in a
smarter way. The proposed changes to the package are listed below:
- The Committee clarified how the bill’s new tax credits
work to ensure the credits are applied correctly and provide the
most benefit to Mainers. The changes also include a new elderly tax
credit
to make sure that low and middle income seniors come out ahead.
- Also added were further steps to remove some business-to-business
taxes. As one example, the Committee removed taxes on repair of commercial
trucks and heavy equipment. They also clarified language in response
to business owners concerned that references in one part of the code
might apply to other parts of the code. They took steps to ensure
that future interpretations of the code will be determined by a rule
making
process in which the public participates. Taken together, these changes
will provide considerable comfort to the business community.
- The Committee replaced a proposed tax on taxi fares with
a surcharge on taxi trips that start or end at an airport. This was
in
response to the impression that a low-income Mainer who relies on
taxis for transportation should not be taxed, but a visitor taking a
taxi from
the Jetport to downtown Portland could bear the cost.
- There are several changes in how taxes on amusements would
apply to non-profits. The Committee wanted to support the non-profit
sector, but without making it harder for business that may provide
the same services to compete.
- Tax Committee Members worked closely with Maine Revenue Services
to develop a practical plan to realize a long-sought-after goal: to combine
the application for the “circuit breaker” property tax
relief program with the income tax form. This will increase taxpayer
participation
in the circuit breaker program, and in so doing, further reduce the
tax burden on Mainers.
An additional change was the removal of all boat repair services. When
Taxation Committee member Elsie Flemings sought public input on the package,
it was brought to her attention that many boat repair services could
be done in other states, and taxing the service put Maine firms at a
competitive disadvantage.
“When we reviewed the bill, it didn’t make sense to tax
a service that could be easily done elsewhere by simply picking up anchor
and sailing to another New England state,” said Flemings, D-Bar
Harbor. “So when the Committee reviewed the legislation, we amended
the original proposal to exempt boat repairs from the sales tax. It was
a good change considering all that we are doing in Augusta to promote
the boat manufacturing and repair business in Maine.”
Beyond these changes, other adjustments to the bill were necessitated
by current economic realities. Maine’s estimated revenues dropped
by $570 million since LD 1088 was first drafted earlier this year. These
new numbers directly affect the tax reform proposal, but not in a way
that endangers the legislation. Maine can still lower the top income
tax to 6.5% and pay for it with the originally proposed sales tax expansions.
The only difference is that the size of the package dropped, because
the state is working with less overall revenue. In February, Maine Revenue
Services estimated that LD 1088 would lower the tax burden on Maine residents
by over $75 million a year. Due to the diminished economy, that figure
is now closer to $55 million. The overall size of the package has dropped
to around $120 million, meaning income taxes will drop by that amount
and sales taxes will be expanded by the same amount.
“The revenue reprojections clearly illustrated the need for tax
reform,” said Rep. Thom Watson, D-Bath, the Chairman of the Taxation
Committee. “This package will both reduce the tax burden on Maine
citizens and stabilize our revenues, both of which will be a much improved
tax policy for the coming years. It’s the right time to do this
and I think our final package strikes the right balance.”
The Taxation Committee supported the bill on a 9-4 vote, and the legislation
will be considered by the full Legislature in the next two weeks.
“These changes allow the Taxation Committee to tighten up the
package and create the best possible bill given the circumstances,” said
Rep. Piotti. “However, the newly structured tax code provides broader
benefits lie under the surface, because it exports even more tax burden.
When the economy rebounds, this new structure will put even more money
in Mainers pockets.”
Contact:
House Majority Leader, John Piotti, 287-1430
Rep. Thom Watson, 442-7493
Rep. Elsie Flemings, 669-2073
Kyle Leighton, communications director, 287-1433
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