AUGUSTA, Maine — Proposals that would raise the state’s sales and lodging taxes and let towns and cities impose their own taxes on meals and hotel stays ran into opposition from innkeepers and Republicans on Friday during public hearings before the Legislature’s Taxation Committee.
The bills came before the committee three days after its members heard testimony on more than a half-dozen other bills that proposed income tax hikes on high earners and major amendments to the state’s tax code. Lawmakers are considering them as they determine how to balance the new state budget that takes effect July 1.
Majority Democrats have already rejected a number of the cuts proposed by Gov. Paul LePage in order to bring the budget into balance. In addition, new revenue projections released Friday predict $60 million less will flow into state coffers during the next two years than previously thought.
Rep. Ben Chipman, an independent from Portland, introduced a bill, LD 1227 , that would raise Maine’s 7 percent lodging tax to 12 percent and split the added revenue 60-40 between the state’s tourism marketing fund and the municipalities where hotels are located.
“Our tourism industry, I think, is undermarketed,” Chipman said. “To me, this indicates an opportunity to raise money from out-of-state tourists to spend on marketing to get more tourists here.”
Maine’s 7 percent lodging tax is the second lowest in New England, and proponents of Chipman’s bill said raising the lodging tax would be preferable to proposals in LePage’s budget package, which cut property tax relief programs and revenue sharing for municipalities.
Michael Allen, Maine’s associate commissioner for tax policy, has said raising the state’s lodging tax to 10 percent would generate $20.3 million in additional revenue in the next fiscal year. Ben Chin of the Maine People’s Alliance suggested directing all the extra revenue to the state’s general fund — rather than earmarking it for tourism marketing — to ease state budget pressures.
“We believe right now the question is not, ‘Are taxes going to go up as part of this budget cycle?’” he said. “The question is, ‘Who will pay these taxes?’”
Tourists don’t factor lodging taxes into their decisions on where to vacation, Chipman said.
“I cannot think of a person who’s complained to me that the lodging tax has kept them from visiting their destination,” he said. “This legislation would not cause the state to lose business. It would create business without generating an extra burden for in-state residents.”
But Republicans on the Taxation Committee weren’t receptive to the proposal.
“You’re looking at a person who would go somewhere else if he was whacked with 12 percent,” Sen. Doug Thomas, R-Ripley, told Chipman.
Greg Dugal, executive director of the Maine Innkeepers Association, said raising the state’s lodging tax would erode one of Maine’s competitive advantages in attracting tourists who might otherwise consider Cape Cod or other northern New England vacation destinations.
“The world we live in today is one of competition,” he said. “People are looking at the bottom line, and if our tax is well in advance of somebody else’s, that tax is going to show in the bottom line.”
Travel websites, he said, display total prices for hotels, and those totals would rise if the lodging tax increased.
“If there were all this money out there around travel and tourism, I would suggest that operators would have increased room rates, which they have not done,” Dugal said.
A steeper lodging tax would create a “media and public relations nightmare” for Maine’s tourist industry, said Bud Harmon, president of the Old Orchard Beach Chamber of Commerce.
“The Canadian market would virtually disappear with this rate increase,” he said. “I have seen this happen with the exchange rate.”
Two bills considered by the Taxation Committee on Friday proposed raising Maine’s sales tax. One bill, LD 1297, would raise the state’s 5 percent tax to 5 2/3 percent to fund education; the other, LD 1141, would raise it to 6 percent in years when state revenue sharing falls below the level prescribed in state law.
Rep. Justin Chenette, D-Saco, sponsored LD 1297 while Rep. Charles Theriault, D-Madawaska, is sponsored LD 1141.
Raising the sales tax to 6 percent would generate $163 million in additional revenue during the coming fiscal year, Allen, the associate tax policy commissioner, recently told the Bangor Daily News.
LD 1402, another bill presented Friday, would repeal excise taxes imposed on spirits, wine and malt liquor manufacturers and instead raise the state’s tax on liquor sales to 9 percent from 7 percent. The bill also would raise the state’s lodging tax to 9 percent and tighten tax requirements around casual house rentals.
LD 1314 would let towns and cities impose an additional 2 percent tax on hotel stays and meals within their borders.
Both of those proposals are sponsored by Rep. Matt Moonen, D-Portland.