February 19, 2013

Local tax: Perennial nonstarter gets a push

Even opponents agree that the governor's budget could spawn a municipal tax on goods, services.

By Randy Billings rbillings@pressherald.com
Staff Writer

PORTLAND - The local option tax: Senators and representatives from all over the state have proposed it many times before, only to see the idea fail in the Legislature.

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This time, however, proponents see an opening like never before.

Gov. Paul LePage's budget proposals could drastically reduce funds available to municipalities by eliminating revenue-sharing, cutting education aid and trimming property tax relief programs. And some local officials said that could make lawmakers more willing to consider allowing a local sales tax on things such as retail purchases or lodging.

LePage's budget, which would also decrease income taxes for some residents, would result in one of the biggest -- if not the biggest -- tax shifts in the history of the state, according to Portland Mayor Michael Brennan.

"The choice is very stark and clear whether people want a relatively small decrease in their income tax or a relatively significant increase in their property tax," Brennan said, noting that the loss of revenue-sharing would only exacerbate the property tax situation.

"As a result of the governor's budget," he said, "I think the local option tax then gets onto the table."

The argument for a local option tax goes like this. Municipalities have few options to raise revenue to support services such as fire, police, trash-hauling and general assistance. Cities and towns rely primarily on property taxes, though they also collect auto excise taxes and various fees for permits and licenses.

A local option tax -- whether on meals or lodging or other commodities -- would help lower the pressure on local property owners by generating revenue from discretionary purchases and services used by visitors.

But opponents such as the Maine Chamber of Commerce, Maine Restaurant Association and the Retail Association of Maine (formerly the Maine Merchants Association) have historically argued that a local option tax would only hurt businesses and discourage tourism.

Two of those groups -- the chamber and the retail association -- said they would likely oppose such efforts again, but would have to review the specifics of any proposed bills before taking a position.

"I don't think our position has changed," said Curtis Picard, executive director of the retail association. "It ends up being a record-keeping nightmare for businesses. Like anything, the devil is in the details."

Since 2001, only once has the Legislature not taken up a local option tax proposal. Seven of the bills considered had either a sponsor or co-sponsor from Portland or South Portland, two cities with plenty of retail and lodging businesses.

This year, three bill titles have been submitted to allow a local tax, although the final wording has not been released.

• Rep. Matthew Moonen, D-Portland: "An Act to Allow a Local Option Tax."

• Rep. Sara Gideon, D-Freeport: "An Act to Allow Local Sales Tax."

• Rep. Sharri MacDonald, R-Old Orchard Beach: "An Act to Allow Options for Local Revenue Enhancement."

Moonen said the details of his bill were still being worked out. But he agrees that municipalities -- even those previously opposed to a local option tax -- will be looking for options besides property taxes to make up for potential losses in state revenue.

"This time I think it's possible that more municipalities around the state would be interested in a local option tax," Moonen said. "That would give them more flexibility in how they deal with the looming possibility of revenue-sharing being eliminated."

MacDonald said her proposal would allow a community to adopt or repeal a local option tax on any commodity by a local referendum. The proposed limit would be 5 percent, and communities would have the liberty of structuring it as a year-round or seasonal tax, she said.

(Continued on page 2)

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Today's poll: Local option tax

Do you want your town or city to have the ability to adopt a local option tax?



View Results