Focus on sales tax increases obscures the reality of a better deal for Maine people

January 11, 2016 by

Garrett Martin blog 11-16-2015Last year’s budget deal reduced taxes for 83% of Mainers. But the changes don’t happen all at once. And as the Maine media has reported, new sales taxes, potentially some of the least popular provisions of the bipartisan deal, went into effect on January 1. Taxpayers won’t fully realize more popular provisions – income tax cuts for nearly 9 out of every 10 Maine families and property tax cuts for homeowners – until 2017.

Supporters of Governor LePage, bent on discrediting last year’s budget deal, are doing their best to call attention to these recent sales tax increases. Here’s the problem with that ploy: under the governor’s own tax proposal that lawmakers rejected Mainers would pay much more in sales taxes if the governor had gotten his way.

For starters, the governor proposed what would have been the largest sales tax increase in the state’s history. He sought to raise the sales tax to 6.5% compared to the current 5.5% rate. While the legislature’s budget does apply taxes to previously untaxed items like prepared food (the so-called “snack tax”), the governor’s plan would have taxed a much wider range of goods and services including movie tickets, soft drinks, and even snow plowing, to name just a few.

Admittedly, MECEP has supported broadening Maine’s sale tax in the past as a way to pay for education, health care, and other services that build Maine’s economy. That’s not what the governor’s plan does. He ultimately wanted to use his sales tax increases, along with cuts in programs that help reduce property taxes, to fund the biggest income tax cut in Maine’s history. That tax cut would have mostly benefitted the wealthiest Mainers at the expense of higher sales and property taxes for everyone else, not to mention higher college tuition, overcrowded K-12 classrooms, and erosion of other public services that help preserve a strong middle class.

Fortunately, lawmakers refused to go along with the governor. They crafted their own plan and overrode the governor’s veto to pass a budget that accomplished some remarkable things. Overall, taxes – particularly income and property taxes – will go down for most Mainers. Out-of-state visitors will pay more to support public investments. Our schools and communities get modest increases in state funding and the legislature protected many services that benefit seniors and people with disabilities the governor’s proposal would have ultimately cut.

The recent news stories remind us of just how complicated our tax system is, and how easy it is to fail to see the forest by focusing on a few “idiosyncratic” trees political operatives use to inflame public indignation. In part, that’s why it is so difficult to enact substantive changes to Maine’s tax system. Folks concerned about the recent changes in sales taxes would be well served to recall the devil in the details of the alternative the governor offered and realize that most Maine working families will pay less in income and property taxes under the legislature’s tax plan while continuing to reap the benefits of good schools and reliable services in their communities. That’s an impressive feat.

There is certainly more work to do, but the legislature deserves credit for passing a better deal than the governor and his supporters originally offered.

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