BANGOR, Maine — Maine voters have soundly rejected a new law that would have lowered income taxes while expanding sales taxes on several new items and increased the meals and lodging tax, the Bangor Daily News has projected.
With more than half of the statewide vote tallied, 60.18 percent of voters wanted to repeal the law while 39.82 percent favored keeping it, according to unofficial results compiled by the BDN.
Question 1 asked: “Do you want to reject the new law that lowers Maine’s income tax and replaces that revenue by making changes to the sales tax?”
The law, which was passed by the Legislature last year but has been on hold, lowered Maine’s top income tax from 8.5 percent to 6.5 percent for all residents earning less than $250,000 a year. To make up for the lost income tax revenue, the bill broadened the state’s sales tax to more categories of goods and services and raised the meals and lodging tax from 7 percent to 8.5 percent.
Rep. David Trahan, R-Waldoboro, who led the repeal effort, said shortly after 9 p.m. that he felt confident a yes vote would prevail based on early victories in more populated areas such as Augusta and Bangor.
“We’ve had an advantage over the other side in terms of thousands of volunteers who have been out there getting the word out,” Trahan said. “It’s been a truly grassroots effort.”
Sen. Joe Perry, D-Bangor, who served on the Legislature’s taxation committee and helped write LD 1495, said shortly after the polls closed that results in Bangor (2,959 yes, 2,478 no) suggested that the repeal effort would be successful.
“If it doesn’t pass in Bangor, it will be crushed statewide,” he said. “I never thought I’d see the public vote to raise their own taxes.”
Voter reaction to Question 1 appeared divergent.
Mandy Urquhart, an unenrolled voter from Pittsfield, voted yes on Question 1.
“I don’t feel [tax reform] is a helpful situation. Voting no would hurt my financial situation,” Urquhart said. “I hope we reject it. There are plenty of other things that could be done besides continuing to raise our taxes.”
Erin Dean, 19, a first-time voter in Bangor and also unenrolled, had a different opinion.
“I’m not an expert on the issue, but it seems like if we can get more money in taxes from tourists while lowering taxes for people who live and work here, that seems like a good idea,” she said Tuesday afternoon inside the Bangor Civic Center.
Jim Murray of Newport, who owns a beauty salon, an ice cream stand and rental housing properties in Maine, said Question 1 was the most important issue for him on the ballot.
“I have three businesses, and I don’t want any more taxes that I’ll have to pass on to my customers,” he said.
Heidi Stevens, 56, of Lincoln came out to vote on the sales tax question, but she didn’t vote the way one might expect the owner of a fast-food restaurant to vote.
“At first I was against it because it would make it appear like food prices had gone up,” said Stevens, who owns a Subway sandwich shop on Route 6 in Lincoln, “but I changed my mind because I think it more evenly distributes the tax burden on residents.”
The tax reform issue also divided many state business groups. The Maine State Chamber of Commerce and the Bangor Region Chamber of Commerce supported reform.
Groups whose members would be affected significantly, such as the Maine Innkeepers’ Association and the Maine Restaurant Association, opposed it.
Supporters of tax reform have said that the changes would shift the tax burden more evenly and provide stability to a tax base that is too reliant on building materials and new car sales. More importantly, a big chunk of the expanded sales tax would be paid by out-of-state visitors to tourist-friendly Maine.
Opponents, who gathered the 55,000 signatures needed to put the referendum question on the ballot, have said they didn’t mind the income tax reduction, but they have argued that expanding sales taxes hurts Maine residents. New taxable categories such as car repairs, pet grooming and dry cleaning have drawn the most ire.
The reform bill also eliminated many income tax deductions and exemptions from the state’s tax code, something repeal supporters claimed would hurt businesses, although those deductions and exemptions were replaced by a refundable tax credit.
Maine Revenue Services had projected a $55 million reduction in tax burden for Maine residents and estimated that as many as 90 percent of Mainers would see a net tax reduction.
“We passed up an opportunity that may never come around again,” Sen. Perry said Tuesday night. “The worst part is, the yes side never came in to work on this, so I’d be interested to see if they have an alternative to tax reform.”
Trahan agreed that the issue of tax reform should be revisited.
“It’s not enough for us to say no,” he said. “Now, we have to offer a true income tax cut and find a way to pay for it without gimmicks.”
BDN writers Christopher Cousins and Nick Sambides Jr. contributed to this story