Commercial fishermen are expected to attend a public hearing in Augusta Tuesday to comment on a proposal to abolish the 5 percent sales tax they pay on diesel fuel.

The fuel tax is widely seen as contributing to losses in Maine’s groundfishing fleet to ports in Massachusetts, which does not tax fuel for fishermen.

Rep. Bruce MacDonald, D-Boothbay, said getting rid of the tax would give relief to the state’s lobstermen and other commercial fishermen who have been hit hard by rising fuel costs.

“If we can provide this exemption, it will increase activity on the waterfront and bring about more economic growth,” said MacDonald, a member of the Marine Resources Committee and sponsor of the bill, L.D. 185.

MacDonald said the exemption would apply only to fishermen who land their catch at Maine ports.

The sales tax on fuel has been in effect since the 1950s. MacDonald’s measure is one of several that seek to reduce the taxes assessed on fuel used by the commercial fishing, agriculture and forest industries.

Eliminating the tax would reduce state revenues by an estimated $570,000 a year. Gov. Paul LePage and the Republican-led Legislature are calling for big cuts in state spending.

The tax has contributed to the exodus of Maine’s groundfishing fleet to Massachusetts. A decade ago, 300 to 400 boats were based in Maine. Today there are about 70.

But the biggest factor behind their move is Maine’s prohibition on the sale of lobsters caught in groundfishing drag nets. Massachusetts allows the sale of lobster bycatch, which can add several thousand dollars in profit per trip.

James Odlin, a Portland fisherman who once brought the largest catches of any fisherman to the Portland Fish Exchange, moved all three of his boats to Massachusetts ports when fuel costs took off several years ago. He said he would definitely move much of his business back to Portland if the fuel tax were abolished.

“We want to operate from Portland. We always did,” said Odlin.

He said he saves about $3,000 a trip buying his fuel in Massachusetts.

Last year he spent $1.2 million on fuel in the Bay State. If he had bought the fuel in Maine, he would have spent $60,000 more, he said.

Odlin said the decision on where to land a catch is made at the end of each fishing trip and depends on the cost of fuel, the price the fish will fetch and whether there is any lobster on the boat.

He said if the sales tax was no longer part of the equation, he would land his fish in Portland much more often.

Mike Beardsley, executive director of the Professional Logging Contractors of Maine, said abolishing the sales tax on fuel is an idea that should be expanded to other sectors, such as logging.

At minimum, he said, the sales tax on fuel should be a fixed price, such as 5 cents a gallon, rather than a percentage of the price. Beardsley said the cost to the state in lost sales tax would be made up by increased income tax from businesses that benefit.

The hearing, before the Committee on Taxation, is scheduled for 1 p.m. Tuesday in Room 127 of the State House.

 

Staff Writer Beth Quimby can be contacted at 791-6363 or at: [email protected]