AUGUSTA, Maine — Legislative leaders’ plan to revamp Maine’s tax structure met with stiff opposition from segments of the state’s business community during a spirited hearing Thursday that continued well into the night.
A bipartisan group of lawmakers has put forward a plan it claims will help stabilize Maine’s tax revenue base by shifting some of the focus away from income taxes by expanding sales taxes.
As written, LD 1088 would reduce Maine’s income tax rate from a high of 8.5 percent to a flat 6.5 percent, although the measure’s authors said new tax credits would further lower the tax rate for most residents.
In turn, the bill would increase the meals and lodging taxes from 7 percent to 8.5 percent and extend the 5 percent sales tax to a host of products and services, including car repairs, cab fares and recreational activities such as white-water rafting and bowling.
The result, according to legislative leaders, would be a less volatile tax system that collects more from tourists and out-of-state visitors while putting $75 million back in the pockets of Maine taxpayers.
“It truly is a different way to look at tax policy,” said Rep. John Piotti, D-Unity, the House majority leader and one of the key architects of the bill. “It is not a Democratic bill and it’s not a Republican bill.”
The bill has three Republican co-sponsors and was endorsed by several business organizations, including the Portland Chamber of Commerce and the Androscoggin Chamber of Commerce.
But it was clear Thursday that bill supporters have a long way to go convincing other segments of the state’s business community.
“We don’t consider this tax as spreading the burden. We consider this as putting the burden squarely on the shoulders of the tourism industry,” said Joseph Christopher, co-owner of Three Rivers Whitewater in The Forks and Millinocket.
Bill opponents, who crammed the committee room and filled part of an overflow room, were largely in favor of lowering the income tax rate, which is one of the nation’s highest.
But the two sides disagreed — often passionately — over the effects of the sales tax components of the bill. Speaker after speaker said that the deepening recession makes this a bad time to impose additional taxes on Maine businesses.
Peter Daigle, chief operating officer of Lafayette Hotels of Bangor, pointed out that Mainers make up the majority of customers at many of Lafayette’s locations, including the Senator Inn and Spa in Augusta and the Best Western White House Inn in Bangor.
The bill also would increase sales taxes at fairs, conventions, movie theaters and other businesses that serve largely Maine residents.
“It won’t make Maine a better place,” Daigle said. “It will only add to our already high tax burden.”
Piotti and other advocates openly acknowledge that Mainers will shell out more in sales taxes but they insist savings in income taxes will more than cover the difference for about 80 percent of residents.
A married couple with two children earning $75,000 would see their annual tax payments decline by roughly $500 after accounting for the higher sales taxes, according to figures distributed by the bill’s sponsors. A single parent with one child earning $25,000 would pay $120 less in taxes under the proposal.
Four independent economists testified Thursday that the bill would stabilize Maine’s tax revenues without putting the state at a competitive disadvantage in terms of sales taxes.
But such statements did little to temper the fear and distrust among opponents, who significantly outnumbered supporters in the room. At one point during the hearing, tempers rose when the bill’s critics felt they were being short-changed on speaking time, prompting committee co-chairman Sen. Joe Perry, D-Bangor, to pound his gavel to quiet the increasingly aggravated crowd.
One particularly vocal opponent was removed from the room briefly by State House police.
While the tone of the critics eased, it did not change their dislike for the proposal.
Andy Meucci, manager of Family Fun Bowling Center in Bangor, said many lanes are struggling to stay in business as the number of league bowlers and regular visitors drops.
“This tax is just one more nail in the coffin of the bowling industry,” Meucci said.
Piotti said many of the bill’s opponents overlooked the benefits of reducing Maine’s income tax rates during their fixation on the sales tax increases. Yes, Mainers would end up paying more in sales taxes, the Unity Democrat said. But most still would come out ahead for the year because of the income tax reductions, he added.
“They are going to have additional money in their pockets so they can go out to dinner again or they can go skiing that weekend,” Piotti said.
Most of the Taxation Committee members have signed onto the bill as co-sponsors. The legislative leadership may have a tougher job selling the tax package to the rest of the lawmakers in the House and the Senate, however. Gov. John Baldacci also has expressed concerns about aspects of the bill.