Maine and Taxation: Reform is Coming
March 3, 2009 -
With the Stimulus Package numbers still be sorted out, it is time to focus back on a big issue affecting Portland and the State - taxes.
During the week of February 23rd, 2009, Senator Joe Perry, Senate Chair of Taxation Committee, shared the preliminary tax reform package. I know some people like the big details while others like every detail. Here's a bit of both:
Big Picture
Overall, the tax reform bill that emerges will be revenue neutral, meaning all the cuts and increases will balance out at $0.
The goal of the tax reform bill is to stabilize revenues, as Maine is currently too reliant on home construction and car sales, to stimulate economic development, export the tax burden to tourists, and provide tax relief to Maine residents.
Major Initiatives
* Expand the sales tax base
* Raise meals and lodging tax
* Direct all new revenues to income tax relief
Bill Components
1. Lower the top income tax rate from 8.5% to 6.5%, and additionally create a resident tax credit to lower the tax rate below 6.5% for low and middle class income Mainers.
2. Expand the sales tax base to include amusements & recreation, maintenance services, various telecommunication services, dry cleaning, pet boarding, storage units.
3. Increase meals and lodging to 8.5-9% and expand this tax to cover candy, soda, beer, wine and liquor.
4. Raise the tax on car rentals from 10% to 12%
5. Increase the real estate transfer tax (RETT) from .0044% to .01% over properties over $500,000. Up to $500,000 the RETT would stay at current rate.
My thoughts
Reducing Mainer's income taxes will have an immediate impact. Mainer's will keep more of their money in their pockets, and the additional money spent will help stimulate our economy. Exporting taxes to visitors eating and staying in Maine is sound public policy. Every season Maine hosts millions of visitors and this marginal increase is keeping in line with our New England neighbors. Finally, expanding the sales tax will finally end the yo-yo effect to State revenues. The services picked all have existing taxes on them and few are essential services.
What do you think? Let me know and like always feel free to contact me about anything.
Thanks
-Justin
