Every single elected official in Augusta knocked on doors during election season talking about the need to help small businesses. It is critical for those elected officials to stand up and fix an egregious wrong.
Maine voters narrowly increased funding for education in November when they approved Question 2. Maine students deserve an effective education system and additional funding, but the 3 percent income tax surcharge on annual income over $200,000 falls squarely on the shoulders of Maine’s small businesses. That’s right — 11,000 of the 16,000 tax filers who are subject to this surcharge are Maine’s small-business people who file their business taxes through their personal income taxes. These are people like a small grocery store owner in Cumberland County who employs 20 people, a husband and wife who own two Main Street gift shops, and a farm equipment dealer in rural Maine. That 3 percent income tax surcharge creates a new 10.15 percent income tax bracket and directly hurts the very people who every elected official campaigned to help.
How do we repeal the 3 percent income tax surcharge and find additional revenue to help fund education appropriately? We start by leveling the playing field between brick-and-mortar retailers and their online counterparts. Maine’s small-business entrepreneurs have been fighting to stay alive with one arm tied behind their backs for too long. With the growth in online commerce, Main Street retailers have been unfairly punished with a tax code that gives their online competitors an advantage. Every day, the stores in our communities are required to collect the state sales tax, while out-of-state online retailers get a free pass.
While every retailer deserves a level playing field, more is at stake than the fate of an individual storefront. When retailers in our local downtowns close, foot traffic drops for others; payroll, sales and property tax receipts drop; and jobs diminish. It affects more than just the storefront. Our communities take a hit, including public services funded by the local property tax base. The result is a downward spiral that results in fewer services and a weaker local economy.
But it doesn’t have to be that way. Maine lawmakers have an opportunity this year to restore free market competition and give local merchants a fighting chance. Maine lawmakers should enact legislation similar to legislation in South Dakota, Vermont and elsewhere that would enable Maine Revenue Service to collect sales tax from online entities that do business in Maine. This legislation would make it clear that Maine expects all sellers to comply with Maine’s sales tax law. It doesn’t raise taxes; it simply ensures that all who do business in Maine play by the same rules.
Retail always has been competitive, and it always will be competitive. The way customers shop these days requires retailers to adapt to changing desires and technologies. Our tax policy should do the same. Tax policy shouldn’t give a select few special treatment nor should we be saddling our small businesses with the second highest income tax rate in the country. Maine’s local merchants are ready to compete on a level playing field — repeal the 3 percent income tax and require online retailers to collect and remit sales taxes.
Curtis Picard is the executive director of the Retail Association of Maine.