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Big Labor Exempt Under Gang's Cut-and-Paste Tax Reform

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The Gang of Eleven

The Gang of Eleven

AUGUSTA – Top lawmakers on the so-called Gang of Eleven said Friday during a work session of the Legislature’s Taxation Committee that services provided by labor unions will be exempt under their proposed expansion of Maine’s tax code.

The revelation came about after Sen. Doug Thomas (R-Somerset), the Tax Committee’s top Republican, asked the plan’s supporters  exactly which services the plan’s expansion of the sales tax would include, mentioning collective bargaining services specifically.

“It is our intent to tax legal fees,” said Rep. Gary Knight (R-Livermore), the lead sponsor of L.D. 1496, An Act to Modernize and Simplify the Tax Code.

“Union dues, I don’t recall them being discussed,” said Knight. “I believe they are not included.”

Sen. Dick Woodbury (U-Cumberland), the architect of the tax reform overhaul, agreed with Knight that union dues and service fees would not be taxed under the Gang of Eleven plan. (Recommended: Gang of Eleven Touts Tax Increase…)

Unions, whether of state workers or of private sector employees, are organized as non-profit corporations. The union provides a service for which employees pay dues or fees. Under L.D. 1496, employment-related services purchased from non-profit corporations organized as labor unions would be tax exempt. Employment-related legal services provided by non-union lawyers, however, would be taxable under L.D. 1496.

The decision to exclude labor unions from newly written classes of taxable services seems to be more of an after thought than a calculation. Intentional or not, the carve out is now an intractable feature of the Gang of Eleven’s tax reform plan. Given the control organized labor has already exerted over the 126th Legislature, attempting to tax union services like other legal services would commit the plan to doom. Still, exempting union-provided services while taxing lawyer-provided services is likely to add to the diverse criticism the tax reform plan has garnered.

In addition to labor union services, education and medical spending would also be exempt under the plan. Most members of the Tax Committee now agree that hoe heating oil also should not be taxed, while the taxable future of fire wood remains unclear. Although many details have yet to be settled, the final plan will tax residential electricity and water, funeral services, groceries, hair cuts, and many professional services.

Lawmakers are aiming to have statutory language, i.e. a non-concept version of the bill, delivered to the Tax Committee by Tuesday, although there is some doubt as to the size of the distance between the concept and the law. In addition, the nature and scope of the proposal means that moving it through the current session would add a whole new element to the circus-like negotiations over the biennial budget. 

Sen. Anne M. Haskell (D-Portland), chair of the Tax Committee, expressed concern as to whether the Committee and Maine Revenue Services (MRS) could possibly flesh out the details of the concept draft before statutory adjournment in June.

“I think we’re a lot closer than you suggested,” replied Woodbury. 

Woodbury said that many of the definitions that need to be clarified could be easily drawn from previous efforts to shift the income tax burden onto sales taxes, such as the bill (L.D. 1495) Gov. John Baldacci signed into to law in June of 2009.

“It’s simple cut and paste from previous efforts,” said Woodbury.

S.E. Robinson
Maine Wire Reporter
srobinson@mainepolicy.org

About Steve Robinson

Steve Robinson the editor of The Maine Wire. A native of Dexter, Maine, Robinson is a graduate of Bowdoin College.

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