Officials in Portland and other cities thought proposed cuts in state municipal aid offered the best chance in years that the Legislature would approve a measure allowing communities to levy local sales taxes to raise additional revenue.

But the state Senate voted late Wednesday to kill a measure sponsored by Rep. Sharri MacDonald, R-Old Orchard Beach, that would have allowed communities to adopt such a tax if approved by local referendum.

MacDonald said her bill, An Act to Authorize Options for Local Revenue Enhancement, L.D. 427, was approved 101-48 in the House, but defeated in the Senate, 31-4.

Portland Mayor Michael Brennan was among those who were optimistic about prospects for passage of the local-option sales tax in light of Gov. LePage’s budget proposal earlier this year to suspend revenue-sharing to municipalities. The proposal, if adopted, would have meant a $200 million hit to municipalities, including a $6.1 million loss of revenue for Portland.

But the House and Senate recently passed a two-year budget that would reduce revenue sharing to municipalities by $75 million – well below the $200 million proposed by LePage. LePage is expected to veto the budget, but the House and Senate passed it by margins large enough to override if lawmakers don’t change their minds.

Brennan said a comprehensive tax reform proposal by Sen. Dick Woodbury, an independent of Yarmouth, dominated the tax debate and effectively pushed the local option tax off the table.

“I think that really crowded out any serious discussion of a local option tax,” Brennan said.

Portland Rep. Matt Moonen had sponsored another local option bill, but it was defeated in May.

MacDonald’s bill originally called for allowing a 5 percent tax, but it was amended to allow a 1 percent tax that could have been applied to any commodity.

A local-option tax has always been a tough sell. Groups such as the Maine Restaurant Association, Maine Innkeepers Association and Retail Association of Maine have argued that a local option tax would hurt businesses and discourage tourism.

“It ends up being a record-keeping nightmare for businesses,” said Curtis Picard, executive director of the retail association.

But MacDonald, a first term representative, said she was encouraged by the level of support in the House.

“It has never, ever gotten as far as it did this year,” MacDonald said. “I think people are really beginning to think about different ways to increase the revenue.”

Even if the House and Senate budget is enacted, there is still reason for concern about the possibility of further cuts in revenue sharing, Brennan said.

The mayor said he plans to keep an eye on a state task force attempting to find $40 million in new revenue by closing tax loopholes and exemptions. If that effort fails, Brennan said, an additional $40 million will come out of municipal revenue sharing in the second year of the two-year budget.

“What it does is create an uncertainty that hasn’t existed with the revenue sharing program in 40 years,” Brennan said.

Brennan and MacDonald said that given the current fiscal climate, they both believe a local option tax is still a worthy pursuit.

“It’s not going to die. I think it’s time has now come,” said MacDonald. “Its time has passed as a partisan issue. It’s a Maine issue.”

 

Staff Writer Randy Billings can be contacted at 791-6346 or at:

rbillings@mainetoday.com

Twitter: @randybillings