Governor’s tax reform faces strong opposition at hearing

Good news! The response to Governor Paul LePage’s tax reform proposal has been largely positive. Expanding the sales tax base? Great idea! Wait, you don’t mean ME, do you? The proposal is a fine idea as long as lawyers, accountants, summer camps, snack foods, lift tickets and golf are not included.

The problem with Maine revenues, and the subject of a string of tax reform proposals over the past couple of decades, is that Maine has largely shifted from a manufacturing to a service economy. Since services are not subject to the sales tax, the array of taxable items has shrunk considerably, shifting more and more of the tax burden to the income and property taxes.

The Governor wants to fix that, too — at least the income tax part. He proposes to lower the income tax and make up for it by taxing nonprofits. Needless to say, they queued up at the budget hearing, too. Hospitals, colleges, social service providers and other doers of good in Maine communities stood shoulder to shoulder in opposition.

Nonprofits allege that were it not for them, the state would have to pick up the services they provide. In many cases they are right. Housing the homeless, feeding the hungry, and clothing all of the above are taken care of by a vast array of nonprofit shelters, food pantries, and thrift shops. Many of them may be too small to trip the $500,000 trigger in property valuation that would lead to payment of taxes under the Governor’s proposal. But not all.

In Maine’s cities and coastal communities where property valuation is highest, it does not take all that much property to hit the half-million-dollar mark. Despite their valuation, most of those nonprofits are scraping by, engaged in an endless scramble for dollars to fund their missions. And aren’t we glad they do.

They are not only sources of food and shelter, they make every effort to teach the basics of good nutrition or connect their clients to resources that can help with jobs or education.

Next in line behind the newly taxable and the nonprofits were Maine’s municipalities, who stand to lose the last of their state revenue sharing under the Governor’s budget. This is not Maine Municipal Association’s first rodeo. Revenue sharing has been a target since the early ’90’s, and the towns’ arguments are well-refined.

The bottom line is that what is lost in state funding will be largely made up on the property tax. Over one-third of Maine municipalities do not have nonprofits to tax, and trying to persuade taxpayers that they will be better off overall due to the income tax reduction and various tax credits in the Governor’s proposal is an uphill battle.

Municipal officials focused on the oft-heard call for them to collaborate (they do), and reminded legislators that much of what they do is mandated by the state. Towns are told what they have to do and how they have to do it on public matters ranging from fire training to assessors to harbormasters to animal control.

Maine’s cities and towns contend that it is their efforts, and their tax dollars, that provide the infrastructure and services that attract business to Maine. State municipal revenue sharing returns a small amount of state tax collections to municipalities to assist with these efforts. Or at least it used to. And with its potential demise, municipal officials maintain that legislators are pushing the tough choices down to the local level.

With friends like these, who needs enemies? Should the Appropriations Committee be persuaded by these powerful opponents of the Governor’s budget, it will essentially be looking at a total re-write of same. With the division of labor under the dome this year, getting the necessary votes will be challenging.

Even a majority vote would be difficult, but if a budget is not passed by April 1 it will require emergency status and a two-thirds vote to take effect by the beginning of the July 1 fiscal year. Most budgets are passed with just such a “super-majority” and early in the session legislators of both parties were anticipating that would be the case this year.

For those of us trying to follow along, here are the directions from the Appropriations Committee on finding your way around the budget: “Part A contains all departments and their associated programs (each in alphabetical order) with baseline amounts program initiatives changing appropriations and allocations. Part B (which is not part of the public hearings) contains approved reclassifications and range changes. The Final Document contains the language portions. Part H and Part F as seen on the website are two addendums that provide the appropriations and allocations associated with language parts “H” and “F” but were inadvertently omitted from Part A.”

Everybody got that? Supporters of the budget are asked to line up on the left. When both of you have testified we will hear from opponents, who will queue up in an orderly fashion at the door of Room 228, through the hall, down the stairs, out the door and along State Street toward Hallowell.

Jill Goldthwait

Jill Goldthwait

Jill Goldthwait worked for 25 years as a registered nurse at Mount Desert Island Hospital. She has served as a Bar Harbor town councilor and as an independent state senator from Hancock County.

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