July 1, 2013

The state budget: 5 things you need to know

You will feel the effects of the financial plan approved by the Legislature last week. Here's a glance at you can expect.

By Michael Shepherd mshepherd@mainetoday.com
State House Bureau

and Matt Byrne mbyrne@pressherald.com
Staff Writer

(Continued from page 1)

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"Taxes are meant to discourage behavior," he said. "I really don't think we want to discourage people from eating out, but that's what some of our members think may happen to some extent."

Maine's meals tax will remain lower than those in New Hampshire and Vermont, which are both at 9 percent. It will remain higher than Massachusetts' statewide tax, although Massachusetts allows local taxes on meals while Maine does not.

Maine's lodging tax will remain lower than most of its neighbors, too, but only slightly. New Hampshire and Vermont are at 9 percent each. Massachusetts' statewide rate is 5.7 percent, but it's higher in cities, while Connecticut's is 15 percent. Rhode Island assesses a 7 percent sales tax on top of a 6 percent room tax.

Grotton said Maine should be careful not to give up its competitive advantage on meals and lodging taxes because of its far-flung location compared to other states.

"We always have to remember we're at the end of the trail," he said. "The fact that we're a little lower on the tax end is a good thing." 

2. Sales taxes and newspapers

It's not just lobster dinners and hotel rooms that will get more expensive.

The state's sales tax will move from 5 percent to 5.5 percent in October. So, if you're planning to buy a $500 television, making the purchase before then would save a couple of dollars. That TV would cost $525 after taxes now. It will cost $527.50 in October.

Except for New Hampshire, which doesn't have sales tax, Maine will have the lowest sales tax in New England. Vermont, Massachusetts, Connecticut and Rhode Island all are at 6 percent or higher.

However, the fact that tax haven New Hampshire is Maine's next-door neighbor concerns Curtis Picard, executive director of the Retail Association of Maine, especially regarding big-ticket items.

"If you're shopping for a new washer and dryer, this 10 percent sales tax increase might be enough to push you over the border to get it tax-free," he said.

Also under the new state budget, newspapers and other periodicals will lose a sales tax exemption in October, gaining Maine $5.9 million in revenue over the two-year period.

So, for example, a $2.50 Sunday newspaper will cost $2.64 after taxes. The tax hikes will hit all sales, including newsstand purchases and subscriptions.

According to the most recent data kept by the Newspaper Association of America, which dates back to the early 2000s, only 16 states taxed newsstand sales of newspapers then. None of those were in New England.

Earl Brechlin, editor of the Mount Desert Islander and president of the Maine Press Association, a newspaper trade group that the Portland Press Herald/Maine Sunday Telegram and sister papers belong to, called the repeal of the exemption "unfortunate." But, he said, the association accepted the tax change in exchange for keeping state public notices in print newspapers, an important revenue stream for the industry. 

3. State employees

If you work for the state of Maine, you are much more likely to feel the impact of the budget -- and like it.

After a five-year freeze, state workers will get merit pay increases again thanks to $7.6 million in the budget that also protects longevity pay that Gov. Paul LePage proposed to eliminate, said Chris Quint, executive director of the Maine State Employees Association, a state employees union.

(Continued on page 3)

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