Lawmakers looking to nickel and dime Mainers with a local option sales tax


Lawmakers on Maine’s Taxation Committee will hold a work session Thursday to debate the merits of LD 1254, “An Act To Authorize a Local Option Sales Tax on Meals and Lodging to Provide Funding to Treat Opioid Use Disorder.” The bill, sponsored by Rep. Michael Sylvester of Portland, would allow municipalities to enact, by local referendum, a year-round or seasonal one percent local option sales tax (LOST) on meals and lodging sales within their jurisdictions.

LD 1254 was originally considered in the First Session of the 129th Legislature but was carried over to the Second Session. Despite the title of the bill, LD 1254 contains no requirement that the revenue towns receive from the LOST be used to combat the opioid epidemic. Instead, the bill states the revenues must be used for the purpose(s) outlined in the referendum question establishing the LOST. Therefore, LOST revenues can be used for any purpose.

In 2019, The Maine Heritage Policy Center published research that found a LOST in Maine would hurt low-income Mainers and undermine the success of Maine businesses in border counties.

A LOST would help few municipalities throughout the state, particularly one focused on meals and lodging sales – it would benefit just a small handful of service centers. For example, if all municipalities in Maine implemented a broad-based one percent LOST, 10 municipalities would receive roughly 42 percent of all revenue generated statewide. Meanwhile, 70 percent of jurisdictions, or 356 municipalities, would receive less than $100,000 in new revenue.

When focused on meals and lodging specifically, a LOST is even less helpful to the average Maine municipality. Based on 2018 meals and lodging sales data from Maine Revenue Services, the LOST contained within LD 1254 would generate $38.4 million in new revenue if enacted statewide. Ten municipalities – Portland, Bangor, South Portland, Bar Harbor, Ogunquit, York, Wells, Augusta, Scarborough and Auburn – would receive approximately 45 percent of that revenue.

While liberal lawmakers are eager to enact a new tax, rarely do they consider its impact on the low-income individuals they seek to help. The lowest 20 percent of income earners in Maine pay an effective sales and excise tax rate of 6.1 percent while the state’s top earners pay just 0.7 percent.

Sales taxes are regressive and punish those who already struggle to make ends meet. Giving Portland a few million extra dollars to play with doesn’t outweigh the burden LD 1254 would create for the city’s low-income residents. Under LD 1254, Portland would be taking in new revenue on the backs of its poorest residents.

In addition, enacting a one percent LOST on meals and lodging sales would further incentivize cross-border consumption at the expense of Maine businesses. Mainers already travel to New Hampshire to buy tobacco, alcohol and other products. Under LD 1254, they’ll be traveling to the Granite State to dine out with friends or enjoy a weekend getaway.

Research shows that as long as consumers are within 31 to 38 miles of a low-tax jurisdiction, consumers will go out of their way to shop there to avoid unnecessary taxes. Local option sales taxes increase cross-border shopping from high-tax jurisdictions to low-tax jurisdictions by 10 to 14 percent.

This is particularly troubling when you consider that Maine border counties already struggle to compete with New Hampshire border counties. Because New Hampshire does not levy a sales tax, businesses in Maine border counties lose customers to their counterparts in the Granite State. Per capita reteail sales in New Hampshire border counties ($19,644) outperform per capita retail sales in Maine border counties ($11,962) by nearly $7,700 per person – a LOST would only grow this disparity.

Establishing a LOST in Maine is a bad idea that will create a patchwork of taxation throughout the state, giving Mainers greater incentive to cross the border to purchase goods and services.

About Jacob Posik

Jacob Posik, of Turner, is the director of communications at Maine Policy Institute and the editor of The Maine Wire. He formerly served as a policy analyst at Maine Policy. Posik can be reached at

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