The Maine Legislature will consider a bill next year that would allow Maine cities and towns to levy local sales taxes.

With Democrats in control of the Legislature, the push for a local-option sales tax law is likely to win more support than in previous sessions, when such proposals have been beaten back.

But the bill still faces significant opposition from Republicans and some Democrats.

“Members of the 129th Legislature have not even been sworn in, yet Democrats are chomping at the bit to raise taxes on Maine citizens,” incoming Senate Minority Leader Dana Dow, R-Waldoboro, said Friday. “Having chaired the Taxation Committee, I know that raising any tax is detrimental to our local economy. Local-option sales taxes will pit local communities against each other with citizens driving a few miles down the road to get a better deal on large-ticket items and services.”

A similar bill failed to pass last year, but Rep. Mike Sylvester, D-Portland, said he’s making a renewed attempt to get such a law on the books in an effort to diversify municipal revenue streams.

For Portland, which has annual budget of about $360 million, a 1 percent local tax would generate $16 million a year, according to an estimate by the Maine Municipal Association, which represents cities and towns before the Legislature and has made the proposal a top priority.

“The way that this bill is being envisioned by most of the cities and towns that I talk to is as a tourist tax,” Sylvester said Friday, adding that his legislation had bipartisan support in 2018. Sylvester said cities like his own bear many of the expenses of hosting visitors to Maine, but don’t get much in return from the state’s sales tax.

His bill also would distribute some of the sales taxes collected by the state’s largest cities to smaller and more rural communities. The bill would require local approval by a city or town council or by voters at town meeting. Sylvester said the city collecting the tax would keep 85 percent of it while 15 percent would be sent back to be shared with all other municipalities and earmarked for local efforts to combat the state’s opioid overdose crisis.

“Most constituents would be happy to have that money coming back into the city’s coffers rather than sitting at the state,” Sylvester said.

SOME DEMOCRATS OPPOSED

He said the bill is structured so local voters or officials could decide what goods or services would be taxed, and that some communities may want to apply the tax only to lodgings and restaurant meals, for example.

In addition to the Republican minority in the Legislature, the bill also faces opposition from some Democrats.

Sen. Nate Libby, D-Lewiston, the incoming assistant majority leader in the Senate, who also served on the Taxation Committee, said the state should first try to help towns and cities lower property taxes by increasing the homestead property tax exemption and other property tax relief programs

“I’ve long supported comprehensive tax reform that helps export the tax burden to non-resident tourists and lowers the taxes paid by Maine people,” Libby said. “While there may be a role for a local-option tax to play in a broader reform package, I’m not inclined to support it as a standalone measure.”

Portland Mayor Ethan Strimling said Maine municipal governments have little flexibility when it comes to raising revenue and rely heavily on the property tax, which has a high impact on the elderly or others on fixed incomes.

“Basically the only tax we are allowed to levy is the property tax and the excise tax, which is another property tax and it is very regressive,” Strimling said. “It doesn’t allow us to export the burden we have to tourists, and having a municipal-option sales tax allows us to reduce the burden on the property tax when we have to raise money for schools or raise money for roads and everything we’ve got to get done.”

He said were the bill to pass he would advocate using some of the new revenue to expand an existing property tax relief program in Portland that helps about 1,000 elderly residents stay in their homes. Strimling envisions using the funds to at least triple the number of people served by that program, although ultimately that would be a decision for the City Council to make.

BACKED BY MAYORS’ COALITION

Maine is among only 12 states that do not allow for local sales taxes, according to the Tax Foundation, a nonprofit Washington, D.C.-based tax policy think tank. Maine’s statewide general sales tax of 5.5 percent is also the fifth lowest sales tax rate in the U.S., according to a 2017 Tax Foundation report.

The Maine Municipal Association estimates that if cities elect to add a 1 percent tax, Portland would take in the most, raising about $16.8 million. Bangor would be second, taking in $13.7 million, followed by South Portland with $10.6 million, Augusta with $8.3 million and Auburn with $7.6 million.

Strimling said the state’s mayors’ coalition also is backing the measure this year and he hopes it moves quickly through the State House, which will be under Democratic control.

With 89 seats in the 151-seat House, 21 of the 35 seats in the Senate and a new Democratic governor, supporters see the measure being muscled through.

“I think there is a lot of momentum now with many more Democrats obviously,” said Strimling, a former lawmaker. “I think we got a pretty good shot of getting this over.”

 

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