The State Legislature has officially defeated a bill that would have lowered Maine’s sales tax rate from 5.5 percent to 5.25 percent on October 1, 2023, and to 5 percent on July 1, 2024.
The bill, LD 1747, would not have impacted the sales tax rates for “prepared food, lodging, rental vehicles, liquor or adult use cannabis.”
In 2013, Maine “temporarily” enacted a sales tax increase, raising the rate from 5% to 5.5%, for the period of October 1, 2013 through June 30, 2015, but this change was extended indefinitely in 2015.
Assistant House Minority Leader Amy Arata (R-New Gloucester), the bill’s sponsor, testified to the Committee on Taxation that the LD 1747 would “fulfill the promise that was made in 2013” when the sales tax increase was first introduced.
The Maine Revenue Service raised concerns in their testimony before the Committee regarding the feasibility of phasing in the reduction in accordance with the schedule set forth in the bill. In response, Rep. Arata stated that she would be “happy to propose an amendment to implement the full sales tax reduction to 5% effective January 1, 2024.”
This amendment, however, was never introduced.
Curtis Picard of the Maine Retail Association argued in his testimony that lowering the sales tax would be “one of the most equitable ways” to return the state’s excess revenue to the taxpayers, as well as an effective means by which to “make Maine more attractive to businesses and tourists.”
“As we have stated many times before, Maine is the only state that borders only one other state, and that state happens to be New Hampshire which has no sales tax. Although LD 1747 would not eliminate the sales tax, it would make us more competitive and help keep dollars that are spent in New Hampshire here in Maine,” Picard said.
Nick Murray of the Maine Policy Institute offered testimony neither for nor against the bill, arguing that reducing the sales tax is an expedient way to “provide relief predominantly to low-income earners,” but that “this moment in Maine state budget history calls for lasting and enduring income tax cuts.”
“Basically, taxes should only be levied on the same dollar once. It is not right for the government to tax your earnings, before you even see them, then also tax you when you spend those earnings,” he said.
According to a 2023 study, Maine has the 3rd highest overall tax burden in the country.
The House voted against LD 1747 on Tuesday, and the Senate defeated it the following day in a roll call vote of 21-13.
All Senate Republicans voted in favor of the bill, as well as two Democrats, Sen. Joe Baldacci (D-Penobscot) and Sen. Craig Hickman (D-Kennebec).
Disclosure: The Maine Wire is a project of the Maine Policy Institute.