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June 12, 2009

Baldacci signs tax reform bill

By The Mainebiz News Staff

Gov. John Baldacci this morning signed into law a slightly revised tax reform bill that he introduced yesterday, and which the Legislature hastily passed last night. The bill received stiff opposition from the business community, and there's at least talk of mounting a people's veto.

After letting the original tax reform bill, LD 1088, sit on his desk for nearly a week, Baldacci yesterday introduced LD 1495, which the House passed last night by an 84-61 vote and the Senate by a 20-13 vote. Baldacci's bill keeps intact most of LD 1088's provisions, including a decrease in the income tax rate from 8.5% to 6.5% for those making under $250,000, an increase in the meals and lodging tax from 7% to 8.5% and an expansion of Maine's 5% sales tax to more goods and services. The expanded sales tax would cover "amusement, entertainment and recreational" services, including tickets to theaters, movies and museums, and fees on activities like white-water rafting trips, and "installation, repair and maintenance services," including furniture restoration, vehicle repair and the maintenance of office equipment.

However, Baldacci's bill includes the following changes to LD 1088:

  • It eliminates the expansion of the sales tax on some recreation activities, including fees for ski lifts, bowling alleys, swimming pools, skating rinks and golf courses (though, fees for miniature golf courses will still be taxed)
  • It makes a portion of the Earned Income Tax Credit refundable for lower- and middle-income families
  • It taxes Mainers earning more than $250,000 a year at an income tax rate of 6.85%
  • It eliminates the increase in the Real Estate Transfer Tax on home sales of $500,000 or more
  • It increases the amount of sales tax on meals and lodging funding that goes towards tourism marketing from 5% to 6%

The new law goes into effect 90 days after the Legislature adjourns. All tax changes go into effect on Jan. 1, 2010, except for the sales and use tax on short-term auto rentals, which goes into effect Oct. 1, 2009, according to the governor's office.

LD 1088 was met with firm opposition from Republicans and the business community, who say the bill is too complicated, hurts Maine's small businesses and does not represent meaningful tax reform. A coalition of chambers of commerce and business owners on Tuesday delivered a letter to Baldacci laying out the 10 reasons why he should veto LD 1088.

David Clough, director of the Maine chapter of the National Federation of Independent Business, said there is talk of launching a people's veto of the bill, but he said it's a costly and time consuming process. He said there's another avenue people opposed to LD 1495 have suggested. "Veto the people that pass these kind of laws."

 

Reader comments

From John Diamond (Fri 6/12/2009 1:53 PM)

To clarify, the three largest regional chambers of commerce in Maine-- Portland, Bangor, and Androscoggin County--all formally endorsed the tax reform package. That point has not been adequately reflected in news stories.

From Bob (Fri 6/12/2009 2:06 PM)

Another Augusta shell game. Can you find the pea? The socialist spenders in Augusta don't actually want meaningful tax reform. Just move some money around and "presto change o", we can claim we are fighting for Maine people. The only thing these clowns are fighting for is to get more of my money to feed their spending habits. Try to keep your eye on the pea, or better yet, let's not play this game at all. Fire these hustlers at the poll.  

From Rachel Campbell (Fri 6/12/2009 3:42 PM)

Small Business is the backbone of business in Maine. The legislature and Governor are truly intent on breaking it.  

From Rick Snow (Fri 6/12/2009 4:19 PM)

I don't understand, a few weeks ago Baldacci said that he had to sign the gay marriage bill for constitutional equality, and this bill as just taken away my constitutional equality! Not only will I pay more has a tax payer, my business is now not equal to other entertainment businesses. Lets get this bill killed before more damage is done.

From Chris Duval (Fri 6/12/2009 5:27 PM)

Another possible "peoples veto"? Please.
Why don't we dump the legislature and just put every issue to a direct vote?

I haven't read this whole bill yet, but I like the lowering of the income tax rate. And I like transferring more taxes to meals and lodging...let the tourists pay more. I find the claims that a higher lodging tax will keep tourists away to be non credible.

Ask yourself -- when you go away on vacation, do you choose a destination based on the lodging tax? Of course not!

From Skip (Sat 6/13/2009 8:34 AM)

Bob you've summed it up perfectly well. Would only add this: High Taxes, Low income= No new businesses, no new jobs and no future for the people of this once Great State of Maine.  

From Mike Cyr (Mon 6/15/2009 5:27 AM)

let me guess, is the governor going to fund this promo like he did with the last one for thermal solar hot water projects which were way under funded for the tax credits or rebates offered. he may talk the talk, but has yet to put his money where his mouth is, except for the latest stunt he pulled last week by adding 100 or so new types of businesses to collect sales taxes now. nice, just what would make me want to move to this state especially while driving through the tax free state of new hampshire.  

From Greg (Mon 6/15/2009 8:06 AM)

In any economy it is a challenge to steer tourists to your business. In this economy we are losing tourist. To tax even more the hand that feeds you is only going to have negative effects on our tourist businesses. Why increase taxes on meals and lodging and not tax skiing and golf? Why tax mechanics and not lawyers?  

From Anne (Mon 6/22/2009 11:01 AM)

I agree that tax reform is desperately needed but this isn't it. As a small business owner I resent the state loading more taxes on the tourists (incidentally one of the largest generators of state incomes) assuming that it will not impact their travel plans. They may still come but if they are paying more taxes they will expect me not to raise my rates to compensate. My expenses are not going down. Decreased tourism, and there is decreased tourism so far this year, effects how much labor I employ, how much I spend on infrastructure repair (effecting local tradesmen), and lastly how much sales tax I collect.

For the uninformed that assume tourism is the well that can be accessed again and again without consequences, one only needs to visit New York City lodging sites where prices have dropped like stones with a 17% sales tax. I assume that if they were full they wouldn't drop rates.

I feel the state government is missing the bigger picture. To raise taxes without reducing the extravagent waste at the state level is only putting off the problem until they run out of money again. I pay for my health insurance dearly. Retirement accounts are reserved for money left at the end of the year (not much lately)

State workers take these things as well as cost of living increases for granted. There are some hardworking, consciencious workers but for the most part they are slow, ineffecient and arrogant. Most would not last in the private sector. With the increase in technology, it would seem that it would take less staff to process the same amount. Yet there is no hiring freeze or even attrition policy.

The only intelligent portion of this bill is that the state will dedicate an additional 1% to tourism from 5-6%. Considering the return is $100 for every $1 spent, that must make sense to even the great minds in Augusta.
 

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