AUGUSTA — Over the past decade, choices in the Legislature have caused roughly $720 million worth of budget shortfalls in towns and cities across Maine.

This year, lawmakers should seize the opportunity to patch the holes they’ve made in municipal budgets. But they should do it without tilting our tax code further out of balance or leaving rural towns behind.

That means saying “no” to the local-option sales tax, which would hit the poorest Mainers hardest and do little to help our smallest communities make ends meet.

The state is required to send 5 percent of the income and sales taxes it receives to municipalities. This funding, known as “municipal revenue sharing,” helps pay for critical local services and reduces pressure on property taxes, with a portion of the funds designated specifically for service centers.

But since 2009, every state budget has fallen short.

At first, lawmakers cut revenue sharing because of the Great Recession. But after Paul LePage was elected governor, his budgets repeatedly cut revenue sharing to pay for income-tax cuts that primarily benefited the wealthiest. Our schools also paid the price for income-tax cuts, as budget after budget failed to fully fund education.


The proposed two-year budget being debated in Augusta would cut revenue sharing again, asking towns and cities to forfeit $160 million – all while state revenues are down $864 million as a result of LePage-era income tax cuts. Several municipalities, burned by years of underfunding from Augusta, are pushing lawmakers to let them implement new, local sales taxes to help make up some of the difference.

The funding challenges in our municipalities are real, but the local-option sales tax is the wrong solution.

Maine’s tax code is already out of balance, with those at the very top paying less in state and local taxes as a percentage of their income than those at the bottom. But of all the broad-based taxes, sales taxes hit the poor the hardest and make it even harder for them to get ahead.

According to analysis by the Institute on Taxation and Economic Policy, the bottom one-fifth of Mainers pay more than 6 cents of every dollar they earn to sales taxes, while those in the top 1 percent pay less than 1 cent. Local sales tax increases would make matters worse.

While the local-option sales tax would allow some communities to raise meaningful revenue, it would provide no solution at all for the dozens of mostly rural towns with few or no taxable sales.

The 10 municipalities with the highest meals and lodging sales in the state generate 45 percent of the state’s meals and lodging tax revenues, according to state data. But those same 10 municipalities are home to just 16 percent of the population. Similarly, the 10 municipalities with the highest total taxable sales in our state generate 42 percent of all sales tax revenue but represent only 19 percent of the state’s population.


By creating a new system of haves and have-nots, the local-option sales tax would create even greater division between communities with means and those without.

Instead of deepening inequality within and between communities, we should focus on a statewide solution to our local budget challenges. Namely, we should finally pass a state budget that fully funds municipal revenue sharing and state aid to local schools.

We can do that this year with a comprehensive, state-level approach to revenue. Efforts to export more of Maine’s tax base through increases to the meals and lodging taxes should be part of the solution – but only if they are paired with progressive income tax reforms that rebalance the tax code, such as rolling back the LePage-era tax cuts for the wealthiest and expanding income-tax credits for low- and middle-income earners.

That balancing act is possible only at the state level. That’s where we can responsibly raise the revenue necessary to help our communities – all our communities – thrive.

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