Panel hands in plan to save $40 million by eliminating tax breaks — or is it $80 million in new taxes?

The State House in Augusta.
The State House in Augusta. Buy Photo
Posted Dec. 12, 2013, at 4:49 p.m.

AUGUSTA, Maine — Some say “tomato” …

Democrats in the Legislature call a plan submitted to the budget-writing Appropriations Committee on Thursday a roadmap to closing $40 million worth of tax breaks — largely ones for businesses. Republicans quickly labeled it a scheme to increase taxes by $80 million.

Sen. Anne Haskell, D-Portland — co-chairwoman of a special task force created as part of the biennial budget to find $40 million in savings by limiting or eliminating tax breaks and credits — told Appropriations that her group felt confident its recommendations would be enough to meet that goal, despite a lack of hard data to support the recommendations.

If the Legislature doesn’t find the money in tax expenditures, the budget automatically would cut municipal revenue sharing, which already was reduced by about a third, and almost certainly would result in increased local property taxes.

Gov. Paul LePage zeroed out municipal revenue sharing in his proposal for the two-year, $6.3 billion budget that took effect July 1, but — under intense pressure from municipal lobbyists and progressive advocacy groups — the Legislature restored most of it in a compromise budget that withstood LePage’s veto. It remains a point of conflict between LePage and legislators.

“I believe we’re close to the $40 million, even if the numbers are not well defined,” Haskell said.

Democrats have lauded the report as an important step to close corporate loopholes and scale back tax breaks for big businesses.

Meanwhile, Republicans have criticized the report for including an expansion of the sales tax worth up to $50 million in new revenue by taxing amusement, recreation and entertainment services; cable and satellite TV; certain personal care services; and other services.

Together, all the recommendations in the report could add up to more than $80 million in new state revenue. That idea has members of the GOP bristling.

“Mainers overwhelmingly believe that we should reduce spending instead of increasing taxes to solve the state’s budget problems, and they’re right,” said House Republican Leader Ken Fredette of Newport, who accused the panel of “doubling down on new taxes on Maine families — everything from haircuts to movie tickets.”

So is it $40 million in savings from closing tax loopholes, or $80 million in new revenue from a broadened sales tax?

The answer: It’s both. Many of the savings in the plan that Haskell referenced are cuts or elimination of programs to benefit businesses, though cuts are also made to tax breaks for students and historic property rehabilitation.

Haskell and her co-chairman, Rep. Adam Goode, D-Bangor, acknowledged the presence of “additional recommendations” for new taxes in the plan, but stressed that neither they nor their Republican colleagues on the task force — Assistant Senate Minority Leader Roger Katz, R-Augusta, and Rep. Don Marean, R-Hollis — supported those proposals.

Those ideas did, however, have the support of many of the nonpoliticians on the task force. Lawmakers balked at the idea, saying the plans were too politically dubious, and said new taxes fell outside the scope of the task force’s mandate.

Still, Haskell said that it was her duty as chairwoman to represent the opinions of everyone on the task force, even if she didn’t agree with them.

“While the supporters of the expansion identified in this section recognize that such expansions may not be popular, they believe strongly that worthwhile options should not be abandoned because there may be opposition,” the report states.

The group also heralded its work to establish a permanent review process for tax expenditures. The process is being hammered out by the nonpartisan Office of Program Evaluation and Government Accountability and would ensure that every state tax break or credit is reviewed at least every eight years to ensure the state is getting bang for its buck.

Rep. Dennis Keschl, R-Belgrade, serves on the Appropriations Committee and was one of the “Gang of 11” legislators who attempted to pass comprehensive tax reform last session. He said he was pleased that such a review was finally being created, and hoped it would address a lack of record-keeping and accountability for tax expenditure programs.

“There’s a lack of data,” he said. “How do you measure the success of a particular tax expenditure? What was its purpose in the first place? You often can’t even find that.”

The Appropriations Committee will consider the recommendations from the task force when the second legislative session begins in January.

Follow Mario Moretto on twitter at @riocarmine.

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