Will plan to raise taxes on lodging, meals and sales hurt Maine’s tourism industry?

Pedestrians stroll by the line of shops and restaurants on Cottage Street in Bar Harbor on Sunday, June 9, 2013.
Mario Moretto | BDN
Pedestrians stroll by the line of shops and restaurants on Cottage Street in Bar Harbor on Sunday, June 9, 2013. Buy Photo
By Mario Moretto, BDN Staff
Posted June 09, 2013, at 12:21 p.m.

BAR HARBOR, Maine — The most recent $6.3 billion biennial budget proposal would fill at least some of the cuts proposed by Gov. Paul LePage by temporarily increasing sales, lodging and meal taxes. That would create millions of dollars of additional revenue, but what would it mean for tourism in vacationland?

A little perspective: The proposed tax increases amount to an additional half-cent per dollar on the sales tax and 1 cent on the dollar for lodging — including campgrounds — and prepared food. The $178 million in revenue generated over the two-year lifespan of the increase would restore $125 million of $200 million in municipal revenue sharing that the governor would see cut entirely.

It would also fund raises for state employees who haven’t seen a wage increase for more than four years, and restore two property tax relief programs that the governor had proposed to eliminate.

Industry groups, perhaps predictably, oppose the measure. They claim that pennywise visitors would bristle at the increase and may choose to vacation elsewhere.

But tourists and business owners interviewed over the weekend in Bar Harbor — Maine’s premiere tourist destination — said the increase wouldn’t deter them from visiting.

“When we go on vacation, we just know where we want to go. We don’t research things like the tax rate,” said Richard Atorick, a South Carolina resident vacationing in Maine with his wife, Julie.

“If this proposal came up at home, I’d say ‘go for it,’” Julie Atorick said.

Vaughn Stinson, CEO of the Maine Tourism Association, a lobbying group, said it had opposed raising the lodging and meals tax, though he is confident the industry could absorb the increase.

“The economy is still recovering,” he said. “People are watching everything they spend. They do make comparisons and tax increases do matter. But at the end of the day, our industry will make it work. We always do.”

And while an increase from 7 percent to 8 percent on lodging and meals would send that rate to its highest ever in Maine, there is precedent for a general sales tax rate higher than 5 percent, its current level.

According to a Maine Revenue Services report, a 5.5 percent rate would be a restoration of 2001’s sales tax. From 1991 to 2000, the rate had been 6 percent. In 2001 it was lowered again, to its current level.

Matt Zuschlag owns and manages Eden Rising, a self-described “eclectic gift shop” with imported goods from all over the world. He said he remembers when the tax rate was higher, and that an increase wouldn’t affect his business at all. Several other business owners interviewed casually over the weekend said the same thing.

“The tax rate used to be higher, and we were busier back then,” Zuschlag said. “A half-cent? That’s not a big deal.”

Chris Fogg, director of the Bar Harbor Chamber of Commerce, disagreed. He said that while the Chamber had no official position on the budget proposal, he’s heard this song before.

He said an increase in the lodging and meal tax has been proposed before, always framed as a way to export taxes to out-of-staters who visit, while not affecting Mainers. But not all of the meals and lodging sold in the state are for people from away.

“We see a lot of visitation early in the season from taxpayers on the state of Maine,” he said.

Greg Dugal of the Maine Innkeeper’s Association, said he was “disconcerted” by the proposal. He said each year, different bills are introduced that would raise the lodging tax, and the group opposes each of them.

But he said he understood the effort by the Appropriations Committee.

“It could be worse, and it is designed to sunset after two years,” he said. “We continue to be in opposition to the increase, but we understand this is a very difficult process. It’s probably the most grueling process in state government, passing one of these budgets.”

He said he understood that the average leisure visitor to the state may not notice a 1 cent tax increase, but said it would definitely affect large groups such as weddings or company retreats who book hundreds of hotel rooms at a time.

He also said Bar Harbor may not be the best place to determine a tax hike’s impact on the state.

“Bar Harbor has pretty much had a good rebound after the recession,” he said. “Other towns have not had that.”

The bipartisan committee that drafted this budget proposal claims its the product of compromise. It retains the income tax cuts passed by Republicans two years ago, which Democrats have opposed, while restoring the revenue sharing that municipalities have depended on for decades.

LePage has already threatened to veto the budget, which he said doesn’t address the real problem with Maine’s finances:

“Maine does not have a revenue problem,” he said. “Maine has a spending problem.”

LePage also threatened to veto the Appropriation Committee’s budget two years ago, but eventually allowed that plan to pass into law. If the legislature is to override a gubernatorial veto, supporters of the budget plan will need to amass two-thirds support.

Follow Mario Moretto on Twitter at @riocarmine.

http://bangordailynews.com/2013/06/09/news/hancock/no-agreement-on-whether-proposed-tax-increase-would-hurt-maines-tourism-industry/ printed on July 22, 2014