May 27, 2018
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Independent legislator spearheads effort to reform Maine tax code, close budget gaps

By Matthew Stone, BDN Staff

AUGUSTA, Maine — As legislators consider a bevy of mostly Democratic bills this week aimed at raising additional revenue to fund education, municipal revenue sharing and other programs, at least two additional measures are in the works that propose reforms to Maine’s tax code and more revenue.

The efforts come as Democratic lawmakers have started to reject a number of measures proposed by Gov. Paul LePage to balance his two-year budget proposal. Lawmakers on the Taxation Committee earlier this month, for example, rejected LePage’s proposal to suspend municipal revenue sharing for two years in an effort to save nearly $200 million, and lawmakers on the Health and Human Services Committee last week rejected a number of proposed cuts to Department of Health and Human Services programs.

Sen. Richard Woodbury of Yarmouth, the Senate’s lone independent member, is working out the details of a tax reform proposal that he hopes will offer income and property tax relief for Maine residents while generating a larger portion of state revenue from the nearly 40 million people annually who visit Maine from out of state.

“It’s a pretty substantial nonresident presence that is here in this state for significant portions of the year,” Woodbury said.

That includes those who visit the state for a day, those who take extended Maine vacations, retirees who make Maine their home for much of the year but aren’t legally residents, and those who own second homes in the state.

Woodbury is working on the details of a forthcoming bill, An Act to Encourage Maine Residence, which will propose shifting some of the tax burden to tourists and nonresidents who spend significant portions of the year in Maine.

“They’re driving on Maine roads, they’re going to Maine hospitals, they’re appreciating our wonderful communities and think of themselves often as part of their wonderful communities,” Woodbury said. “I think it’s reasonable to expect a fair share from nonresidents who are here.”

But Maine’s tax code isn’t optimized to collect revenue from them, said Woodbury, a Harvard-trained economist.

“We’re probably collecting less than we could from this group in the sales tax realm,” he said. “There are opportunities to totally redesign our system to collect more from nonresidents who are here in a way to provide relief to our residents.”

That relief would be largely for lower-income residents, according to Woodbury.

In a recent interview with the Bangor Daily News, Woodbury didn’t make specific mention of the state’s 7 percent tax on hotel stays, but there’s at least one bill pending that would raise that levy as a way to collect more from out-of-state visitors. Maine’s state lodging tax is currently the second lowest in New England.

“There are opportunities to totally redesign our system to collect more from nonresidents in a way to provide relief to our residents,” Woodbury said.

On the left end of the political spectrum, a coalition of advocacy groups including the Maine People’s Alliance and the Maine Center for Economic Policy are pushing a plan to roll back income tax cuts passed by the Republican-led 125th Legislature in 2011 and raise additional taxes on the top 1 percent of income earners.

The plan, called Fair Share Now, also would raise the lodging and meals taxes and charge the Legislature with closely reviewing the millions of dollars Maine forgoes annually through business tax breaks and economic development programs. The plan is the second part of an effort by the Maine People’s Alliance which already has generated about 60 town resolutions opposing LePage’s budget.

Garrett Martin, executive director of the Maine Center for Economic Policy, said the Fair Share Now proposal is designed to counteract measures in LePage’s budget that could lead to property tax increases.

“You’ve got this governor who’s very quick to claim he’s given the largest income tax cut in history who very well may be giving the largest property tax increase in history,” he said.

Success for both of these efforts depends on LePage’s openness to proposals that raise state-level taxes, which the Republican governor has said he’s generally opposed to raising.

Woodbury said he has started discussing his tax reform proposal with fellow members of the Legislature’s “Common Ground” caucus, which includes moderate members of both parties. And Martin said Fair Share Now coalition members are reaching out to potentially interested legislators.

Woodbury said he’s prepared for his proposal to be considered as a budget-balancing alternative to LePage’s budget.

“People will be looking for potential alternatives, and I’m trying to help shape what that might look like,” he said.

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