Group questions Maine’s new tax

Posted Sept. 16, 2009, at 9:18 p.m.

PORTLAND, Maine — A conservative public policy group said Wednesday that Maine’s new tax law is unconstitutional and that it’s prepared to file a lawsuit to overturn it.

People moving into or out of the state, as well as out-of-staters who work in Maine, could end up paying thousands of dollars more in income taxes than full-time residents under the tax code overhaul passed by state lawmakers this year, said Tarren Bragdon, CEO of the Maine Heritage Policy Center.

Some 55,000 families would pay the higher taxes if the law goes into effect as scheduled Jan. 1, he said.

The new law creates a flat income tax of 6.5 percent, broadens the sales tax to apply to a number of now untaxed services, and raises the food and lodging tax. It also replaces income tax deductions and exemptions with a new “household tax credit” that applies to full-time residents only, forcing newcomer residents and out-of-staters to pay higher taxes than people who have lived in Maine for more than a year.

“This [tax] is not just mean. It’s wrong,” Bragdon said at a news conference. “And guess what? It’s unconstitutional.”

Before legislators voted on the law last spring, Maine’s attorney general ruled it passed constitutional muster.

Maine and other states routinely give tax credits and other incentives to full-time residents that aren’t offered to nonresidents and part-time residents, said Attorney General Janet Mills. Those range from property tax rebates to in-state tuition fees at state universities.

“We believe the bill is defensible from a constitutional standpoint,” Mills said.

The policy center is prepared to file a lawsuit challenging the constitutionality of the law, but that depends on the outcome of a people’s veto effort to overturn the law, Bragdon said. More than 60,000 signatures have been submitted to state election officials seeking a referendum next June.

If the Secretary of State’s Office rules that not enough valid signatures have been submitted to force a referendum, the center will file a lawsuit immediately, probably in state court, Bragdon said.

If a referendum is held in June, the policy center will file a lawsuit if residents vote to uphold the law, he said. If Mainers vote down the law, a lawsuit would be moot.

Arnold Clark, director of the policy center’s Constitutional Law Center, said the new tax law violates the constitution’s privileges and immunities clause because it creates a benefit for residents — the household tax credit — that is not available to newcomers and nonresidents.

He said the law also violates the constitution’s commerce clause because it imposes a burden on people moving and traveling across state lines, and the equal protection clause because is infringes upon the right of young people to move to Maine.

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