Cloudy Water Tax Issue

Posted May 07, 2009, at 5:34 p.m.

A bill that would tax companies that extract and sell 1 million gallons of water or more a year has stirred debate on the nature of taxes and the public’s relationship with natural resources. The bill, LD 237, sponsored by Rep. John Hinck, D-Portland, would assess a one-cent tax on each gallon of water extracted and sold. Poland Spring, a subsidiary of the Switzerland-based Nestle corporation which has three bottling facilities in the state, is the only company that would pay the tax.

Rep. Hinck argues that state government needs revenue and that water extracted for sale around the country and around the world is a reasonable place to get that revenue. Poland Spring sells some of its water in nine-ounce bottles, he said, which means that penny could be divided over nine retail sales.

Poland Spring officials see the tax in another context. The company withdraws 700 million gallons a year in Maine, which means it would pay $7 million in taxes annually. The company employs 800 in Maine and has an annual payroll in Maine of $40 million, which means the tax equates to almost 20 percent of payroll. That’s a big hit.

The tax likely will not win approval. But debates about taxes on water, and possibly other natural resources, will return to the Legislature.

It’s important to note that taxing natural resource extraction is not a new idea. Some 38 states have some sort of “severance” tax, as it is known (because the resources are “severed” from the Earth). Even Republican bastions like Alaska, Wyoming and Texas have plenty of such taxes. Alaska has fisheries business and resource landing taxes, a mining license tax, oil and gas properties production taxes, two salmon taxes and a seafood marketing tax. Maine currently has just one such assessment, a mining excise tax.

Many Mainers probably are offended by Rep. Hinck’s proposal because they can see a parallel with their own lives: A private property owner should be able to cut the trees, dig the gravel, and pump the water from that property, as long as it is done so within accepted standards. But 700 million gallons leaving the state is quite another thing.

An aquifer does not follow property lines. Setting aside the tax idea for a moment, it seems reasonable that the state should have a stake in managing the resource, if only to protect larger regions from the decisions of a water district in one town that leases extraction to Poland Spring.

With climate change, clean, drinkable water may become frighteningly scarce in the coming decades. Its value may increase exponentially with that scarcity. That scenario should give legislators pause when they vote on the penny tax proposal. If that 700 million gallons leaving the state were to double or triple in the next few years with other companies setting up operations here, state officials might regret not getting a piece of the action, or worse, protecting this valuable resource.

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