In the past few years, we have seen the cost of everything rise, from food and heating oil to health insurance. With these essential items, we’ve also seen an increase in our tax burden. In the past 20 years, Maine has time and again had one of the highest state and local tax burdens in the country. Recently, the legislature began looking at a bi-partisan bill designed to create a revenue neutral tax reform plan.

LD 1088, “An Act to Modernize the Tax Laws and Provide over $75,000,000 to Residents of the State in Tax Relief” (sponsored by House Majority Leader, John Piotti) would cut Maine’s income tax rate from 8.5 percent to 6.5 percent. Under this proposal, Maine people would end up paying $160 million less in income taxes.

To keep the plan revenue neutral, LD 1088 proposes to extend Maine sales tax to some discretionary items that currently are not taxed. The current proposal pending before the Taxation Committee will include the following:

• Lower the top income tax bracket from 8.5 to 6 percent

• Increase the meals and lodging tax from 7 to 8.5 percent

• Increase the tax on short-term car rentals to 15 percent from 10 percent

• Increase the real estate transfer tax for amounts over $500,000

• Expand the sales tax base to currently exempt items, including – amusements, repair and maintenance services (not home repairs, but car and watch repairs, etc), taxi and limousine services, interstate telephone service, personal property services (i.e. – pet grooming and dry cleaning) A complete list of the expanded sales tax items will be available soon.

Proponents of LD 1088 believe that not just Maine’s individual taxpayers will benefit from this plan, but that small businesses would see lower taxes, as well. They feel that it would make Maine a more attractive place to do business, as the 8.5 percent rate is off-putting to business owners and executives. They also cite that LD 1088 is a revenue generator and will bring much needed jobs to Maine, too.

Opponents of this bill feel that this is the wrong time, that the state does not have enough spending restraints in place and that LD 1088 does not have enough tax reductions. Concern has also been raised over the proposals to boost the real estate transfer tax and the state’s lodging and meals tax.

We are all feeling the pinch of Maine’s struggling economy. We have seen far too many cuts to essential services and state programs, and it seems as though our problems are getting worse: the state budget needs to be cut by nearly $1 billion; MaineCare dropped by $65 million; the Consensus Revenue Forecasting Commission recently announced that this recession is projected to be as bad as the 1990-1991 recession; and we are also anticipating an additional estimated budget shortfall of between $350 and $500 million. The Legislature must take a hard look at how we can bring some kind of relief to Maine people.

I would like to hear your opinions about this tax reform plan. Please contact my office me, by calling 287-1515 or visit my website, www.mainesenate.org/diamond to e-mail me. As always, it is my pleasure to serve as your Senator.

Senator Bill Diamond is a resident of Windham, and his Senate district includes the communities of Casco, Frye Island, Raymond, Standish, Windham, and Hollis as Senator of District 1

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