If you haven’t already bought that big-screen TV for football season or relaxed in a bed-and-breakfast in Camden or gone out to that fancy restaurant you’ve been dying to try, you’re going to pay a price for waiting.
State taxes on all of those things just went up, effective today.
Maine’s general sales tax increased from 5 percent to 5.5 percent. The tax on meals and lodging went from 7 percent to 8 percent. And periodicals, including newspapers, became taxable for the first time, which means a paper or a magazine will cost 5.5 percent more.
The increases were approved by lawmakers in June as they looked for ways to add revenue and balance the state’s two-year budget. The $6.3 billion budget, including the tax increases, was a compromise between Democrats and some Republicans whose votes were needed to override a veto by Gov. Paul LePage.
Representatives of the industries most affected by the increases said Monday that they are prepared to collect the higher taxes – and hoping that they don’t push consumers over the edge.
“For most people, the total cost is the most important thing,” said Chip Gray, general manager of the Harraseeket Inn in Freeport. “One percent doesn’t sound like a lot, but whoever has the best deal often gets the business. Is that one percent the tipping point? I don’t know.”
For many individual purchases, consumers may not notice the changes. For a $1,000 television or computer, it will mean an extra $5 in sales tax. On a $50 restaurant bill, it will mean an extra 50 cents. For a $200 hotel room, it will mean an additional $2.
“But over a year’s worth of purchases, it adds up,” said Curtis Picard, executive director of the Retail Association of Maine.
“Obviously, the impact will be greater on big-ticket items,” said Picard, who bought a used car last weekend to avoid the additional $80 to $100 in taxes he would have paid this week.
Dick Grotton, director of the Maine Restaurant Association, said his group plans to keep a close eye on how restaurants are affected by the higher meals-and-lodging tax. He said it may not keep diners at home, but it might make them think twice before ordering dessert, or a drink. It also might make them drop their tip to 15 percent from 20 percent, he said.
“The two good things about this increase are that it didn’t start on July 1, in the middle of tourist season, and that it has a sunset provision,” he said.
The sales tax and meals-and-lodging tax increases were passed as a temporary measure that is scheduled to expire in June 2015.
But not everyone is convinced that the increases will be temporary. Gray said he will be “stunned” if they aren’t made permanent.
“Income taxes were supposed to be temporary, too,” he said.
Except for New Hampshire, which has no sales tax, Maine has the lowest sales tax rate in New England, even with the bump to 5.5 percent. The new 8 percent meals-and-lodging tax is still lower than the 9 percent in New Hampshire and Vermont.
However, Greg Dugal of the Maine Innkeepers Association said many hotels, motels and bed-and-breakfasts have avoided rate increases in many years to stay competitive. He said they are operating on thin margins.
“I understand the Legislature had to do something at the 11th hour, but we’ll have to push hard to make sure the increases stay temporary,” Dugal said.
In addition to the tax increases, consumers will see a new tax of 5.5 percent on newspapers and other periodicals. A $1 paper will cost $1.06, and a $2.50 Sunday newspaper will cost $2.64, after taxes. The lifting of that longstanding tax exemption will provide Maine an extra $5.9 million over the next two years.
The Maine Press Association, a trade group that includes the Portland Press Herald/Maine Sunday Telegram and 32 other newspapers in Maine, objected to the tax change, but later accepted it in exchange for keeping state public notices in print newspapers, an important revenue stream for the industry.
Lisa DeSisto, publisher of the Press Herald, said all home delivery customers were notified of the new tax in advance. She said she feels for the retailers who are used to collecting $1 for the daily paper and now must ask for an additional 6 cents.
Tax increases are always politically tricky, but both Democrats and Republicans adopted the temporary increases in June while trying to avoid cuts elsewhere.
LePage proposed suspending $200 million in aid to cities and towns, and Democrats wanted to balance the budget by delaying or repealing portions of the $400 million tax cut that lawmakers enacted in 2011. Eventually, the two sides agreed on the temporary tax increases.
“Governor LePage is counting on the people of Maine to have amnesia,” said House Speaker Mark Eves, D-North Berwick. “But no one will forget that he proposed massive property tax hikes and cuts to our schools and safety net to fund tax breaks for the wealthy. The Legislature put the brakes on his plan and rejected Republican threats of a government shutdown and instead made the responsible choice to prevent massive property tax spikes and restore cuts to our schools.”
House Minority Leader Kenneth Fredette supported the budget compromise. He said his Republican caucus opposed the temporary tax hikes, but many members did not want to reject the budget and shut down state government.
“Like any compromise, there were parts I liked and parts I didn’t,” Fredette said. “The tax hikes were certainly something Republicans didn’t like and tried to get Democrats to drop, but I’m sure the tax increases would have been much larger if Democrats had their way.”
LePage, who proposed the tax on periodicals in his state budget, has said that the budget and its corresponding tax increases are owned by the Democratic majority. His office released a statement Tuesday telling Mainers that he opposed the increases.
“Retired mill workers living on fixed incomes, elderly widows collecting Social Security and our veterans, who receive nothing more than their military pension – each of them care very much about this tax increase,” he said. “We are already one of the highest-taxed states in the nation. We have some of the lowest per capita income in the country. Now is not the time to ask Mainers to give more of their income to fund government.”
Steve Mistler can be contacted at 791-6345 or at:
Eric Russell can be contacted at 791-6344 or at: