BANGOR, Maine — As the June 8 primary inches closer, there are plenty of opinions on the people’s veto referendum that seeks to repeal a tax reform plan passed last year.
The Maine Heritage Policy Center, a conservative policy group based in Portland, released a report on Thursday from chief economist J. Scott Moody and staff attorney David Crocker that challenges several claims made by tax reform supporters.
Appearing in Bangor, Moody and Crocker outlined what they termed several “myths” of LD 1495, which would lower Maine’s top income tax rate from 8.5 percent to 6.5 percent, broaden the sales tax base and increase meals and lodging taxes.
The first myth, according to the MHPC, is that the reform bill will lower the tax burden on Mainers. The center says that most Mainers will actually see a small, net tax increase because of the expanded sales tax on amusement recreation and repair services, as well as an increase on meals and lodging taxes.
“The idea of ‘exporting’ taxes to tourists is more hope than reality,” MHPC said.
Supporters of tax reform, including Sen. Joe Perry, D-Bangor, have relied on estimates by the nonpartisan Maine Revenue Service that suggest tourists will pay roughly half of the $107 million in new sales taxes. The difference, Perry said, is that Mainers will get the entire $107 million in income tax relief.
“If anyone wants numbers they can trust, Maine Revenue Service is as nonpartisan as it gets,” Perry said.
Another MHPC position is that sales taxes are small-business killers.
“Maine needs lower overall taxes, not a gimmicky shift of one tax into another,” the report stated.
Supporters of reform, however said most economists believe that small businesses care much more about lower income taxes than they do about sales taxes. Chris Hall with the Portland Region Chamber of Commerce, which supports tax reform, said sales taxes are not the deal-breaker that opponents think they are.
“Sales taxes are voluntary — you only pay on what you buy,” he said. “And sales taxes on entertainment, meals and lodging and personal services are collected all over the country, often at higher rates than what’s in the tax reform law.”
Crocker criticized a provision of the plan that eliminates most tax deductions and exemptions and replaces it with a household credit.
“For people with higher incomes, that credit doesn’t go very far,” he said.
The issue with the household credit likely would affect those who itemize deductions, according to Maine Revenue, but that represents roughly 25 percent of Mainers.
Crocker also questioned the constitutionality of some elements of the tax reform plan, but repeal supporters will challenge that only if the repeal is unsuccessful.