Tomorrow, Maine voters will decide on whether or not to retain a tax overhaul passed by that state’s legislature last year. The Maine proposal is being described as an innovative approach to stabilizing state revenues. The aim is to lessen the shock during recession and generally ease the spend-and-slash cycle that sees essential public services wax and wane and exacerbates ideological politics.
In other words, the proposal is something that should deeply interest residents of Colorado, where the Taxpayer Bill of Rights limits revenue and where the legislature will have had to simultaneously hike fees and cut billions from the budget, eliminating thousands of jobs, by the time the recession ends.
In sum, Maine Democrats proposed increasing the number and variety of revenue streams by lowering income tax across the board but expanding sales taxes to include more forms of entertainment and services. Gov. John Baldacci calls it “a tax structure for the 21st century.”
Stateline has the story:
For decades, Maine has struggled with a high top income tax rate, narrow sales tax base and steep property taxes but lacked the political momentum to change its tax system. Lawmakers finally broke the logjam when they voted to broaden the sales tax base so they could lower income tax rates in a way that nearly every Mainer would wind up paying less in taxes…
Under the new law, Maine would create a single, 6.5 percent tax on everyone except residents earning over $250,000 per year, who would pay 6.85 percent… State revenue officials say 95 percent of Mainers would pay lower income taxes.
To make up the $90 million per year lost in the income tax cut, the Legislature and Baldacci want to expand the state sales tax to include more than 100 entertainment, rental, transportation and repair services — many of which are targeted at out-of-staters. The state’s meals and lodging tax would rise from 7 percent to 8.5 percent. Maine, which taxes few services compared to other states, would join states that have moved in recent years to expand their tax base to include more services despite opposition from the businesses affected.
Tuesday’s ballot language is confusing, which may help explain why about 20 percent of Maine voters are undecided, according to one poll of 600 residents. A “no” vote supports the tax changes while a “yes” vote opposes it by favoring repealing the law. Turnout will be heavier than usual for a June primary because seven Republicans and four Democrats will be competing for their parties’ nominations for governor.
An ad in support of the new tax law:
Opponents are stressing how the dozens of new sales taxes would add up. In one commercial, an announcer tells the story of “Your Wedding Day: Complete with New Maine Taxes” about fictional couple Dennis and Michelle who now will be socked with a tax on jewelry repair, hired bands and DJs, limousine and tuxedo rentals, lodging for their relatives from out of state and meals and liquor at the reception. The bride cries throughout the ad.
Supporters of the law, who formed a group called No Higher Taxes for Maine, say the reforms would help stabilize tax revenues to allow the state to cope with budget shortfalls better than it has the past two years. As House Majority Leader John Piotti puts it, “We can’t continue to have a system where in good years fully 40 percent of our sales tax revenue comes from the sales of just two items — new cars and building supplies — which tank in a recession.”
An ad against the new law: