Legislative session deemed ‘sweet,’ ‘sour’

Posted June 15, 2009, at 10:01 p.m.

AUGUSTA, Maine — Business leaders have one common theme in their comments after adjournment of the Legislature over the weekend: It could have been a lot worse and they are grateful for actions that benefited business.

“We did have a real fear going in that we would pay for balancing the budget,” said Maine State Chamber of Commerce President Dana Connors. “What we got was a balanced approach that did indeed share the pain. My hat is off to [legislative] leadership — they set exactly the right tone.”

But, Connors said, there is an ongoing concern that with the recession continuing and state revenues below estimates, the business community could face higher taxes or fees in the months ahead.

“I think we all worry about that,” he said.

David Clough, Maine director for the National Federation of Independent Businesses, agreed the session could have treated the business community “a lot worse” than it did. But he points out that while there was no broad-based tax increase as part of the budget, there is an expansion of the sales tax to new items and an increase in the rate assessed on meals and lodging to 8.5 percent from the current 7 percent. Those changes are part of the tax reform measure signed into law.

“There is a difference between what small-business owners say will make it better for them and what legislators do,” he said. “I would say a fair assessment of the session is that there was the good and the bad, the sweet and the sour.”

Clough said the sales tax expansion in the tax reform bill would cost small businesses because they will need to reprogram their computers and in some cases retrain workers as well. He said that is the “sour” part of the reform bill, but he agrees that the reduction in the top income tax rate is “sweet” and will benefit many small-business owners, with most having their business income reported on their personal income tax returns.

Chris Hall, vice president of the Greater Portland Chamber of Commerce, said his group believes the reduction in income taxes outweighs the sales tax expansions and therefore supported the reform package. He said the long-term implication of the lower tax rates is significant to Maine’s economic future.

“The capital gains [tax] reduction in the bill is really, really important for investment and job creation in this state,” he said. “It might be the most important.”

The capital gains tax is on profit realized on the sale of such items as stocks, bonds and property purchased at a lower price.

Hall also gave the session mixed marks, both from what was passed by lawmakers and what was defeated.

“We saw bad bills get killed, like the employee-at-will bill. That would have eliminated that,” he said, “and we saw good bills made better, like the energy bill.”

In Maine, “at will” or nonunion employees can be fired for almost any reason. The bill listed causes for which employers could fire workers.

Jim McGregor, government relations director for the Maine Merchants Association, said his members believe the “bad” in the tax reform bill outweighs its benefits. He said retailers are particularly hard hit by the scores of new items taxed by the measure.

“Considering the economy, considering the huge revenue deficit, I think the governor and the legislators did a commendable job,” he said, “although there were some fee increases and some tweaks of taxes. It certainly could have been a lot worse.”

McGregor shares the concern that lawmakers may find the business community a target for increased taxes or fees if the economy continues to slump. He said additional costs placed on many employers by the tax reform legislation would be enough of a burden without higher taxes.

Connors said there have been several attempts in past sessions to cut important business programs, such as the Business Equipment Tax Reimbursement program, which reimburses some businesses for the personal property taxes levied by local cities and towns.

If there is a further loss of state revenues, there is also a fear that the wide variety of tax incentives that have been created to encourage economic development may be cut or eliminated.

“That would be a shame after what they have been able to do this session,” said Tony Payne, executive director of the Alliance for Maine’s Future, a business-funded advocacy group. He agreed there were both positives and negatives from the session and said he was impressed at the bipartisan cooperation on the budget. But he also said there is more to be done.

“What they have to do is to restructure government in line with the ability of Mainers to pay for it,” he said.

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