Lawmakers from two legislative committees got an earful Friday on the tax changes proposed in Gov. Paul LePage’s $6.8 billion budget.
There were strong feelings on both sides, and at times the hearing sounded like a replay of last fall’s referendum campaign on Question 2, the question that would add a surtax of 3 percent on Maine households with incomes in excess of $200,000 a year.
Voters approved the initiative, which would use the revenue raised to create a fund for local schools. But Gov. Paul LePage has argued that the state can’t afford it, and has proposed a tax reform plan expanding the sales tax to areas such as haircuts, recreational activities like golf and skiing and professional services, including landscaping and snow removal.
Finance Commissioner Richard Rosen told lawmakers that it’s all part of a tax plan that will help improve the state’s economy.
“This is part of a comprehensive effort to modernize, simplify and make the tax code more competitive,” he says.
In addition to expanding the sales tax, the plan delays the 3 percent surtax for a year and reduces the base income tax rates. The groups that would have to start collecting sales taxes under the LePage plan were out in force to oppose it.
“I strenuously object to this as something rich tourists do here in Maine in the summertime. The vast majority of our rounds, 70 percent, are paid by Mainers,” says Peter Webber, executive director of the Maine Golf Association.
Some spoke out against the surtax on wealthier households, just as they did during the campaign around Question 2. Linda Capra of the Maine State Chamber of Commerce says fears that some higher-income Mainers would leave the state if the measure passed are warranted.
“Since this measure has passed a number of businesses and financial professionals have called on us and indicated they or their clients are doing everything possible to calculate the necessary calculations to leave the state. Some are actually leaving, and some have left,” she says.
She told lawmakers on the Appropriations and Taxation committees that the state will have greater difficulty attracting highly paid professionals for needed areas like medicine and engineering with the high tax rate. Geoff Baur of Idexx, one of the state’s largest companies, agrees.
“As Idexx continues to grow, we want to attract, develop and retain talent in Maine for the good of Maine. The 3 percent surtax works against this objective,” he says.
While the margin of victory for Question 2 was slim, a few thousand votes, several speakers reminded lawmakers that in a democracy, the majority decides. Brunswick teacher Terry Martin says any tax reform should be kept apart from the surtax that the voters approved.
“I am appalled the governor would question the intelligence of his own people. The people of Maine voted for this, the people of Maine want this, I say give the people what they want,” he says.
Martin wasn’t the only teacher to testify. Samantha Sais of Lewiston, who supported the surtax, says that other portions of LePage’s budget would result in higher property taxes that Maine seniors and others on fixed incomes cannot afford.
“The governor’s proposed budget would not only have a dangerous negative impact on some of the most vulnerable students in the state, but it would also severely impair communities by forcing property taxes to rise significantly,” she says.
The budget has several other significant tax provisions, including allowing towns to tax large nonprofits with properties of $10 million or more, and removing tax-exempt status for land trust organizations. It also would change the way schools get their aid from the state, and that worries many that property taxpayers in some communities may be hit hard.
Hearings on the budget continue for another six weeks.
