August 12, 2013

Legislators to rethink tax breaks, exemptions

Incentive programs deemed ineffective or unnecessary could be cut to fill a budget gap that leaves few other options, they say.

By Steve Mistler smistler@pressherald.com
State House Bureau

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Lawmakers backed away from the reimbursement phase-out, deciding instead to form a study group, with business interests among its members, that would look for other ways to modify the program.

It's proven even more difficult to repeal sales tax exemptions. Comprehensive efforts to review and eliminate exemptions have taken place for decades, including in 1980 and 1989.

Sen. Anne Haskell, D-Portland, the assistant Senate majority leader and co-chairwoman of the Taxation Committee, said efforts to repeal or scale back exemptions mobilize even the smallest constituencies.

"You're certainly going to be hard-pressed to stand in front of the person who's running the eye bank for donations of corneas and say, 'You can't have an exemption' when they bring in people who have been impacted," she said.

It becomes harder, Haskell said, when lawmakers have competing ideas about which exemptions are valuable or disposable.

Marean, the Republican lawmaker from Hollis, has firsthand experience. In 2007, he submitted a bill to repeal the sales tax exemption for all-terrain vehicles and snowmobiles purchased by nonresidents. The bill never made it out of committee.

But this year an identical proposal passed, and LePage signed it into law.

The opposition that Marean's bill encountered was a mere shadow of the resistance that greeted a bipartisan coalition's proposal for a major tax overhaul. Lawmakers considered the so-called "Gang of Eleven" bill risky, but the real resistance came from interest groups worried about a proposal to repeal nearly all non-health and non-education exemptions.

"It's politically very hard for people to say I'm not going to give you that tax exemption," Haskell said. "Once you've given it, it's very hard to take it away."

Meanwhile, lawmakers keep proposing more exemptions -- 66 since 2002, according to a partial review by the Maine State Law and Legislative Reference Library.

While legislators may be more willing to reduce exemptions in a climate of tight state budgets, they'll also be facing the temptation of turning to an unexpected surplus.

According to the Legislature's fiscal office, the state finished the last budget year with a $58 million revenue surplus. If state coffers stay in the black, lawmakers may have an easy parachute out of the difficult decisions that await their review of tax exemptions and incentives.

Haskell said the approach will be measured. Rather than outright repeal of exemptions or incentive programs, she said, the commission may instead choose to scale some back, cherry-picking revenue.

Rotundo, the Lewiston Democrat, said lawmakers aren't approaching the review with "preconceived notions." However, she mentioned "corporate loopholes" twice during a recent interview.

"It's not fair to Maine taxpayers to be paying for programs to provide tax subsidies to corporations who are not using these monies to create jobs," she said.

Marean said it's a tough task that will require abandoning partisanship.

"I hope that the committee, whoever it is, can leave politics aside and make a good decision and in the best interests of the state," he said. 

Steve Mistler can be contacted at 791-6345 or at:

smistler@pressherald.com

Twitter: @stevemistler

 

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