April 30, 2013

Maine coalition to propose dramatic tax reform

Consumption taxes would rise and Maine income taxes would drop, says a draft of the bipartisan plan.

By Steve Mistler smistler@pressherald.com
State House Bureau

(Continued from page 1)

Today's poll: Tax overhaul plan

Do you support a bipartisan tax overhaul plan that includes cutting Maine's income tax rate in half, raising sales and excise taxes and eliminating exemptions?



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State Sen. Dick Woodbury, I-Yarmouth

The bill proposes paying for the cuts by raising sales and excise taxes and eliminating a host of the current 87 exemptions. The only exemptions not targeted for elimination are those related to health care and education.

Maine's sales tax is 5 percent. Forty-one other states have a higher sales tax, according to the Tax Foundation. The draft outline suggests raising the rate to 6 percent, which would tie Maine with three other states and the District of Columbia for the 37th highest rate.

Other use tax increases highlighted in the draft document include raising rates on cigarettes, lodging, meals, beer and auto rentals.

Previous attempts to raise those taxes have encountered fierce opposition from industry groups that worry affected businesses will have to decrease rates to remain competitive with other states. The draft outline attempts to offset those fears by increasing funding for the state's tourism budget by $3 million.

Nonetheless, proponents of the plan are girding for the same opposition that met a 2009 tax reform proposal passed by the Democratic-controlled Legislature. Similarly, the 2009 bill paid for an income tax cut -- to 6.95 percent -- by raising sales and excise taxes.

The 2009 proposal was hailed by The Wall Street Journal as substantive tax reform. However, its lack of bipartisan support proved to be its demise. Republicans rallied with affected industry groups to repeal the law via a citizens veto in June 2009.

Proponents of the new bill hope the bipartisan buy-in will prevent a similar fate.

Volk, one of the Republican representatives who has signed onto the proposal, said she didn't support the 2009 effort because it didn't lower the income tax far enough and there were too many carve-outs in the list of taxable exemptions.

She described the new bill as "bold and comprehensive." She said the state budget was in constant "crisis mode" and that she had begun to see the effects in her district.

"The only way out of that is economic growth," she said. "The only way to economic growth, in my opinion, is a lower income tax. You can't just lower the income tax without offsetting it in some way."

Volk acknowledged that opposition is forthcoming.

"We've all pledged that we're not going to allow it to be cannibalized and we're all very proud that it's a bipartisan effort," Volk said. "There's something in here for everyone to hate, but there's also something in here, especially for businesses, to like."

Buzz over the bill has intensified recently as proponents seek additional buy-in from lawmakers and business groups, including the Maine State Chamber of Commerce.

The chamber's 35-member board was presented the proposal on Friday. Dana Connors, president of the chamber, said more details needed to emerge, but that the bipartisan support and timing of the bill gave it "a certain amount of momentum."

It's unclear what position Gov. Paul LePage will take on the proposal. A top tax adviser to the governor could not be reached Monday.

LePage has discussed eliminating the income tax, and expressed a desire to make the state more attractive as a primary residence.

The proposal is also likely to trigger intriguing political subplots among Republican and Democratic leaders.

Goodall said it was the coalition's goal to avoid divisive politics.

"The key is we're trying to craft a proposal in a bipartisan fashion, setting aside politics and doing what is best for the state of Maine," he said.

Woodbury agreed. "I think of myself as a reasonably good policy thinker, but I'm not a great political strategist," he said.

Steve Mistler can be contacted at 620-7016 or at:


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Today's poll: Tax overhaul plan

Do you support a bipartisan tax overhaul plan that includes cutting Maine's income tax rate in half, raising sales and excise taxes and eliminating exemptions?



View Results