May 11, 2013

Maine tax overhaul proposal meets stiff opposition

Critics focus on provisions that would either remove sales tax exemptions or increase excise taxes.

By Steve Mistler smistler@pressherald.com
State House Bureau

AUGUSTA – An overhaul plan designed to provide tax relief to Mainers encountered withering opposition Friday from the industry and interest groups that would help pay for it.

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Independent state Sen. Dick Woodbury, a Harvard-trained economist from Yarmouth, is the architect of the tax overhaul plan now before the Maine Legislature.

John Patriquin / Staff Photographer

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Meanwhile, the two major political parties remained largely silent, another sign that legislative leaders remain cool to the proposal.

The dramatic plan, crafted by a bipartisan group of lawmakers, would flip Maine's tax system by slashing the state's income tax rate in half and making a host of other sweeping changes, including raising sales and excise taxes and eliminating exemptions.

Proponents of the plan told lawmakers on the Legislature's Taxation Committee on Friday that the proposal will provide income and property tax relief to Mainers.

Sen. Dick Woodbury, an independent from Yarmouth, is the architect of the plan. He told lawmakers Friday that the plan is "pro-growth" and designed to attract businesses and spread the current tax burden to nonresidents.

"I believe this plan sends a clear signal to Maine businesses and has a lot of potential to be an economic driver," he said during a public hearing.

The plan cuts Maine's top income tax rate of 8 percent and replaces the current tiered system with a 4 percent flat rate. It also increases the state's homestead exemption from $10,000 to $50,000, a measure designed to provide direct property tax relief to homeowners.

The proposal pays for the cut by increasing the sales tax from 5 to 6 percent while eliminating a host of current sales tax exemptions. It also increases excise taxes on items such as cigarettes, beer and wine, while increasing lodging taxes.

On Friday, a host of groups lined up to oppose the bill, including the Maine Tourism Association, the Maine State Chamber of Commerce, the National Federation of Independent Business, Ski Maine Association, Maine Association of Nonprofits, Maine Innkeepers Association, and Maine Realtors Association.

Lobbyists, some representing multiple organizations, filled the Welcome Center at the State House, which served as an overflow room for the public hearing. Most of those who testified Friday opposed the bill.

The criticism centered on provisions in the bill, L.D. 1496, that would either remove current sales tax exemptions or increase excise taxes.

While many commended the bipartisan coalition of lawmakers for trying to reduce the state's income tax burden, opposition groups weren't thrilled that they were being asked to pay for the cut.

Some said the proposal was too dramatic to be considered so late in the legislative session.

The proposal aims to eliminate a host of exemptions, a move Woodbury said was designed to spread the impact among a greater number of affected groups.

However, on Friday organizations said the proposal would make them less competitive:

The Maine Beer & Wine Distributors Association argued that the proposal unfairly targeted them by doubling excise taxes, from 35 cents to 70 cents on beer, and 60 cents to $1.20 on wine.

Cheryl Timberlake, the lobbyist for the distributors, said the increases would be "devastating."

"Excise taxes have a powerful impact on volume," said Timberlake, adding that companies would likely pass on the increased taxes to Maine consumers, thus resulting in lost sales.

Timberlake also argued that taxes on spirits should be included if beer and wine taxes are increased.

Linda Gifford, with the Maine Association of Realtors, told lawmakers that the provision taxing services would increase the cost of buying a home because Realtor commissions, appraisals, inspections and surveys and title services would also be taxed.

The bill's plan to tax coin-operated services drew opposition from the Coin Laundry Association. Brian Wallace, the executive director of the association, said Maine would join just four states that tax self-service laundries.

(Continued on page 2)

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