Governor LePage’s effort to end revenue sharing in Maine is being combated in Augusta with a proposal for local option sales taxes (LOST) across the state. Maine is one of just 12 states in the union that does not allow a local option tax, and for good reason.
LD 594, sponsored by Sen. Linda Valentino, D-Saco, would allow municipalities in Maine to assess a local sales tax of up to 1 percent on goods and services within their communities.
While there is an array of democrats in support of Valentino and the local option tax, the state of Maine should be hesitant before it considers passing this legislation.
The governor’s budget makes several major changes to Maine’s tax code, including the elimination of revenue sharing and allowing towns to tax non-profit organizations to make up for the loss of revenue, in an effort to cut spending across the state.
A local option tax could further alleviate some of the burden that towns could face from losing revenue, but is it the right option for Maine?
Currently, revenue sharing apportions 5 percent of state sales and income tax revenues to towns for the goods services they provide to their communities. This money feeding back into individual municipalities across the state hasn’t saved taxpayers money, but rather increased spending across the board.
So why add a local option tax in a state where its population is already overtaxed?
A similar situation unraveled in Kentucky earlier this year. Senators in that state killed a house bill that would have put a constitutional amendment on the ballot for the next election cycle that would have allowed municipalities to assess a 1 percent local option sales tax on goods and services in their towns.
Tom Underwood, the state director of the National Federation of Independent Businesses in Kentucky, cited the damages increased tax would put on small, family-owned businesses across their state.
“LOST was a bad idea, period. Letting local government impose an additional sales tax is going to create confusion and completely unnecessary hardships on small, family businesses,” Underwood said in a statement after the legislation failed. “Our members understand that state and local government needs tax money in order to operate, but before we start talking about a tax increase, our elected officials need to guarantee that the government isn’t wasting a penny of the money it already rakes in,” he added.
This same effect would take place on the many small businesses in Maine if LOST legislation took shape in our state.
The objective of the governor’s controversial budget is to cut taxes and save Mainers money. It’s hard to see how LOST legislation in Maine will rectify this issue.
This 1 percent increase towns could expand would be added onto the state’s 5.5 percent sales tax already in place, on top of the governor’s budget plan to increase and broaden the sales tax.
If legislation like this is passed in Maine, we could begin to experience what is referred to as “tax creep,” or an incremental growth in taxes as more tax options slowly grow over time, combining to increase the tax burden on Mainers without providing any substantial advantages for our citizens.
Let’s account for the money already in our system to ensure there is no government waste, and come to terms on Governor LePage’s budget before we enact a local option sales tax in Maine that will burden taxpayers for years to come and undermine small business across our state.
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