Maine firms fear budget will add new taxes, fees

AUGUSTA, Maine — Gov. John Baldacci’s pledge of no tax increases to balance the new two-year state budget has done little to alleviate fears in the business community that they will be hit with taxes and fees to help balance the budget.

“We welcome the governor’s comments,” said Maine State Chamber of Commerce President Dana Connors. “And I am pleased with the comments I have heard from legislative leaders in discussions with them. But there is a real concern that the business community could find themselves paying more taxes or fees or fines to balance the budget.”

He said the magnitude of the state budget problems over the current year extends into the next two-year budget and that means lawmakers will struggle to make cuts and find revenues to fund state government.

“We have to be concerned and realize everything will be on the table as everyone struggles with the budget,” Connors said.

Tony Payne, executive director of the Alliance for Maine’s Future, a business-funded advocacy group, said businesses not only are worried, many are angered at lawmakers who are already talking about raising taxes or fees.

“We think the voters sent a clear message that they are fed up with taxes,” he said. “But businesses are hearing that there are lawmakers that are talking about raising taxes and they are upset about it and concerned.”

Payne said voters repealed the tax on beverages last month by a nearly two-to-one ratio and lawmakers should have gotten the message. All 16 counties repealed the taxes by wide margins.

Jim McGregor, government relations director for the Maine Merchants Association, said members of the business community are very worried that they will be hit with much of the cost of balancing the budget. He is not convinced lawmakers have heard the same message from voters that the business community heard in the beverage tax repeal.

“That is the question,” he said. “Did they hear the message that people are truly fed up with taxes or will they support some taxes or fees?”

McGregor also is concerned that fee hikes will be used as a “back door” tax increase on businesses. He said a number of state agencies that are funded by fees on the businesses they regulate saw the surplus funds they had built up “swept” into the state’s general fund to help fund other programs.

“Fees have become taxes in many ways,” said David Clough, Maine director of the National Federation of Independent Businesses. “My members say the foremost issue is the economy and hanging on to their businesses, then when they think about the state budget they are concerned about tax increases and fee increases.”

Clough said there have been many new fees and fee increases in recent budgets because they seem easier to get passed than a tax. He said a fee should be directly tied to the cost of a service being provided.

McGregor said while Baldacci has said he will not support a tax increase to balance the state budget, he signed the beverage tax increase last spring that the voters repealed.

“We have to worry that everything is on the table no matter what is being said publicly,” he said.

Clough said there also is concern that programs and tax breaks that have helped businesses grow and expand will be cut or eliminated. He said too many lawmakers do not understand that it is the private sector that creates the jobs that grow the economy.

“Each time there is a budget problem, they always threaten to cut back on business investment incentives,” he said. “You do that, and you weaken the economy, and our economy is already weak.”

Connors said there have been several attempts to cut important business programs, such as the Business Equipment Tax Reimbursement program that reimburses some businesses for the personal property taxes levied by local cities and towns. Most states have abolished that tax, and he said the tax put Maine at a disadvantage when a company would consider locating here because it adds to the already high cost of doing business in the state.

“And they have been successful getting rid of some,” McGregor said. “They took BETR away from retailers, and they are a big part of Maine’s economy.”

A wide variety of tax incentives have been created to encourage economic development, and many in the business community fear those will be cut or eliminated.

“What they really need to do is to bring the cost of state government into line with the ability of individuals and businesses to pay for it,” Payne said. “Our government costs too much.”

Baldacci will propose his two-year state budget on Jan. 9, and it is clear a lot of business owners will be watching a lot more carefully than they have in the past.