AUGUSTA — The Maine Senate on Thursday rejected a measure that would have allowed cities and towns to tack on a 1 percent sales tax on meals and lodging if first approved by local voters.

Supporters aren’t giving up on the issue, however, and hope that a lodging-only proposal that emerged Thursday night may have better odds in a Senate re-vote.

The Senate vote to pass the “local option” sales tax bill failed on a 14-21 vote on Thursday. The issue has long been an objective for city and town leaders who say they are increasingly squeezed by the costs of providing services to residents and visitors amid decreases in revenue sharing by the state. Under the bill, L.D. 1254, municipalities could only adopt a 1 percent tax if approved by local voters.

Advocates for the tax have tried to convince the Legislature to support it for three decades, and the Maine House approved it for the first time Tuesday by just three votes. Supporters included the Maine Municipal Association and the Maine Mayors Coalition, which sent a bipartisan team to Augusta in March urging lawmakers to back the proposal.

Sen. Ben Chipman, D-Portland, unsuccessfully pitched the bill to his colleagues in a short floor speech, saying cities were increasingly dependent on raising revenue with the property tax. On average, Chipman said, property taxes in Maine increased by 27 percent over the last eight years.

He said city officials were frustrated by having to go to the same property tax source of revenue “over and over and over again.” Chipman had planned to propose limiting the local tax to lodging in hopes of gaining additional support but he was unable to offer the amendment.

But Thursday night, bill sponsor Rep. Michael Sylvester, D-Portland, succeeded in stripping the meals tax from the bill on the House floor. The House then voted 80-60 – a larger margin than Tuesday’s vote – to endorse the narrower bill that would only allow a local tax on lodging.

“We felt that this would target the tax more toward tourists, which was the initial intent,” Sylvester said.

Under the original proposal, the city of Portland could collect an estimated $3 million a year if voters there approved a local sales tax. The bill also directed that 25 percent of the sales tax collected by cities and towns be filtered back to the Maine Rural Development Authority, which supports economic development efforts in rural areas.

Opponents of the bill, including state Sen. Lisa Keim, R-Dixfield, said the bill was a tax increase. Keim also said Maine already has a 9 percent lodging tax, and adding 1 percent to that would put Maine among the states with the highest hotel tax in the nation.

She said that would put Maine cities and towns, especially those near the state’s border with New Hampshire, which currently has a 9 percent lodging tax, at a competitive disadvantage.

The lodging-only bill now heads back to the Senate for reconsideration, possibly as early as Friday. But with the legislative session slated to end on June 19, time is running out and the measure would likely die stranded between the two chambers if the Senate rejects the narrower bill.

Staff Writer Kevin Miller contributed to this report.

 

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