Tax Reform

In the late night, almost under the cover of darkness, the legislature passed a “tax “reform package. This package originated from a near party line vote on LD 1088. The original proposal called for a tax on such things as car rentals, real estate transfers, ski tickets, car repairs, meals and lodging, candy and many other things. In return the income tax was to decrease from 8% to 6.5. The goal was to try and transfer the loss of income tax revenue to tourists via the lodging and meals tax increase. The Governor did not like this bill so he modified it. The new bill introduced LD 1495, just as the final gavel was about to be sounded removed the ski ticket tax and the real state transfer tax, gave some tax credits and reduced the state income tax to 6.85% for those making over $250,000 and kept it at the proposed 6.5 % for those making under $250,000. Now the good, bad and down right ugly!

Good: There was a successful attempt to broaden the sales tax base. This is critical to do because we get most of our sales tax money from construction and car sales. When times are bad these sources dry up pretty quickly.

Bad: Well, first of all it was done by one party. There was no effort to make this a bipartisan change. Perhaps if they worked together we might have a better package with true bipartisan support.

Second: According to Maine Revenue Services, some 31,000 Maine families will have an income tax increase. A family with a combined income of $100,000, with federal deductions, of say $25000, will loose big in the new tax changes.

Third: Nearly 54,000 families will lose because the sales tax they pay on a broader range of goods will total more than their income tax cut.

Fourth: Car repairs will now be taxable. That’s right, as you decided to keep that old car longer during these tough times you will need to pay tax on the labor to fix it.

Fifth: Small businesses, trades people, technicians, mechanics, and countless others will become tax collectors for the state, with all the accounting and paper work nightmares

Sixth, and perhaps the biggest concern to me is the increase in the meals and lodging tax. The rate is climbing from 7 to 8.5%. While the proponents argue this tax will fall on the tourists, roughly 80 percent of restaurant customers are MAINERS!


THE UGLY: The bill was passed as one of the last items taken up in the session. The 33-page tome was dropped on legislators’ desks only minutes before the vote was ordered. Legislator’s, including yours truly, had little time to read the summary, let alone the fine print packed in the document. And we all know the devil is in the details!!!

Only time will tell how this all works out. To date this tax package is off on the wrong foot.

If you have questions about this or anything else gives me a call at 546-3420 or e-mail me at drtom16@hotmail.com as always it is my pleasure to serve the people of District 90.