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By Rep. Leila Jane Percy
March 18, 2009
NOTES FROM UPRIVER – One of the most often repeated issues brought to my attention by constituents is the need to lower the overall tax burden on the people who live in Maine and the businesses based in Maine.
I have joined my colleagues in several attempts to do just this many times over the past six years, but every time special interests have worked hard and successfully to defeat these efforts. The most recent and significant example of this was in the spring of 2007.
Fortunately, with the leadership of Majority Leader John Piotti and with the support of the current leadership in both the House and the Senate it appears that enough political will now exists to truly put more money in the pockets of Maine people and Maine businesses.
This tax reform is possible without simply stripping funds from services and programs we all depend on to protect our children and the elderly and support our small businesses and public infrastructure. Unfortunately some special interest groups may continue to fight these efforts to cut your income taxes. As in previous years there are organizations that oppose this for their own philosophical and purely partisan reasons, but I believe the people who truly want to improve Maine’s business climate and grow Maine’s economy will no longer tolerate these misplaced efforts.
LD 1088, “An Act to Modernize the Tax Laws and Provide Over $75,000,000 to Residents of the State in Tax Relief”, will provide tax relief to Maine residents, stimulate economic development throughout Maine and stabilize Maine’s tax revenues. It is a “revenue neutral” package which means it lowers the overall tax burden on Maine residents, but does not lower the overall amount of revenue the state brings in to pay for roads and bridges, fisheries management, natural resources protection, health care or police and fire protection.
The bill would lower Maine’s top income tax rate from 8.5% to 6.5%. This will put Maine in the middle of the pack in terms of our income tax as related to other states. Maine’s tax system will remain progressive by providing a household credit which lowers the effective tax rate below 6.5% for most for most Mainers.
While Maine currently has a meals and lodging tax that is the lowest in New England and such tourist destination states as Florida, this package does increase that tax from 7% to 8.5%, which will still be the second lowest in the region, while simultaneously investing more funds in tourism promotion. Some tourist destination towns, such as Bar Harbor, are asking for permission to raise this tax even higher if local voters agree. There is absolutely no evidence to suggest this tax discourages prospective visitors and can be used to pay for the public infrastructure these towns need in order to remain attractive destinations.
A small number of services provided by businesses that already charge sales taxes for items that they sell would also need to start charging sales taxes on the services they offer. For instance Sears would need to start taxing washer/dryer repair services. While there are over 150 items on which sales taxes are charged in other states Maine currently taxes twenty-five items and this bill will increase that to about fifty. Connecticut charges sales taxes on eighty items, and Wyoming, the state with the second lowest tax burden in the nation, taxes 58 items.
All sources of increased revenue in this bill are clearly heavily used by non-residents and therefore highly “exportable” in terms of the impact on people and businesses in Maine. The newly taxed services are mostly recreational and discretionary and it is important to note that business to business services are exempted. Transactions such as buying manufacturing materials to create a finished product are currently exempt and will remain exempt. While Mainers will pay some of these increased costs, the vast majority of Maine people and businesses will still see hundreds of dollars in tax savings as a result of this legislation.
I repeat, even if you pay a sales tax on something that used to be tax free, at the end of the year, you will still have more money in your pocket, or your business account, than you will if this bill does not pass. This money can then be used to support our local economy and grow Maine businesses. Many small business owners have already expressed their support of this bill and see that it will directly benefit their workers, their families and their communities.
I believe we will pass tax reform this year, and if we do I believe it will make Maine more competitive for business attraction and investment and make Maine’s future tax revenues far more stable and predictable. Maine would be much better off now if we had passed similar legislation when we had the chance. I feel confident we will have the political will and foresight to do this year.
As always you can contact me at 207-389-2133/e-mail: Rep. Percy
Stay well,
Rep. Leila J. Percy