AUGUSTA, Maine — Just hours after the House of Representatives overwhelmingly supported a bill that would have allowed local municipalities to vote on increasing sales taxes, the Senate soundly defeated the measure Wednesday afternoon.
LD 427, An Act to Authorize Options for Local Revenue Enhancement, written by Rep. Sharri MacDonald, R-Old Orchard, would have allowed towns and cities to hold local votes to decide if they wanted to increase the sales tax and keep the revenue from the increase. Maine currently charges a 5 percent state sales tax, which will increase temporarily to 5.5 percent on July 1 if a budget that won legislative approval last week is enacted.
The bill passed the House on a bipartisan vote of 101-48 but failed in the Senate with 31 voting for the “ought not to pass” motion and only four voting for the bill.
Debate on the measure pitted lawmakers from rural communities against those who represent more urban areas.
Sen. Linda Valentino, D-Saco, said she supported the bill because tourist towns such as MacDonald’s hometown of Old Orchard regularly collected large amounts of sales tax and often received only a small portion of that in return through the state’s revenue sharing program. Last year Old Orchard collected $75 million in sales tax but saw only $816,000 in revenue sharing from the state, Valentino said.
“That certainly is not fair,” she said.
The amount Old Orchard would get back this year will be even less under the Legislature’s budget, which reduces revenue sharing to cities and towns by about 40 percent.
The bill also included sunset provisions that would have allowed the state to see how many towns would actually enact local options in a short period.
Opponents argued that towns such as Freeport with huge retail businesses and mail-order giant L.L. Bean would have been able to gain giant windfalls on fairly small sales tax increases while others with little sales activity would be left short.
Valentino said the bill probably should have been amended to be applied to only meals and lodging.
“This was to help small communities that can grow to 10, even 50 times their size in the summer and help them out,” she said. “It was just a tool in the tool box.”
But other senators saw it differently.
Sen. Doug Thomas, R-Ripley, said a local option sales tax would unfairly hit residents of rural communities who have to shop or make large purchases such as farm equipment in service center communities, where those bigger retail operations are based.
“It is a tool,” Thomas said. “A tool to separate the people of Maine from their money.”