The Maine Heritage Coverage Heart on Monday launched a brand new coverage temporary, “A Lost Cause: The Local-Option Sales Tax.” The evaluation examines LD 1254, a carry-over invoice that may enable municipalities to enact by native referendum a one p.c native choice gross sales tax (LOST) on meals and lodging gross sales inside their jurisdictions. The invoice will probably be thought-about when lawmakers return to Augusta in January for the second session of the 129th Legislature.
When LD 1254 was
first thought-about by lawmakers earlier this yr, quite a lot of Augusta
politicians and native officers made guarantees about how an area choice gross sales
tax would enhance native providers and cut back property taxes. Nonetheless, the report
launched Monday casts serous doubt on these claims.
Within the temporary,
MHPC explores the impression of LOSTs on low-income Mainers and dissects how the
imposition of a LOST would alter client conduct to harm Maine companies.
municipalities have quite a bit to learn from the imposition of a LOST. For
instance, if all municipalities in Maine applied a broad-based LOST of 1
p.c, 10 municipalities would generate roughly 42% of all LOST income
generated statewide. In the meantime, 356 jurisdictions, or 70 p.c of all
municipalities, would generate income below $100,000.
imposing a LOST particularly on meals and lodging would do little to assist the
common municipality. Right here, too, the revenues could be concentrated to a small
variety of service facilities. Based mostly on 2018 meals and lodging gross sales information from
Maine Income Providers, the LOST inside LD 1254 would generate $38.four million in
new income if enacted statewide.
municipalities – Portland, Bangor, South Portland, Bar Harbor, Ogunquit, York,
Wells, Augusta, Scarborough and Auburn – would generate roughly 45
p.c of that income.
As well as, what
has been the misplaced within the ongoing debate is how a rise within the gross sales tax
hurts struggling Mainers probably the most. The bottom 20 p.c of earnings earners in
Maine pay an efficient gross sales and excise tax price of 6.1 p.c. Maine’s high
earners pay simply zero.7 p.c. Any improve to the gross sales tax hurts low-income
Mainers excess of those that are economically safe.
In 2017, the
U.S. Census Bureau estimated 12.9 p.c of Mainers stay in poverty.
Curiously, six of the 10 municipalities which have probably the most to realize from a broad-based
LOST – Auburn, Augusta, Bangor, Biddeford, Portland and Waterville – have poverty
charges that exceed the state common. For instance, Augusta and Bangor had
poverty charges of 21 p.c and 22.6 p.c, respectively, in 2017.
Whereas these municipalities may increase hefty sums from a LOST, they’d accomplish that on the backs of their poorest residents. Gross sales taxes are regressive and punish those that already wrestle to make ends meet in Maine, and that is no totally different with a LOST.
Maybe most troubling is the impact a LOST would have on Maine companies. Imposing a LOST in Maine would additional incentivize cross-border consumption. Analysis exhibits that so long as customers are inside an affordable commuting distance (31 to 38 miles), LOSTS improve cross-border buying from high-tax jurisdictions to low-tax jurisdictions by 10 to 14 p.c.
border counties already wrestle to compete with New Hampshire Border Counties.
As a result of New Hampshire doesn’t levy a gross sales tax, companies in Maine border
counties lose prospects to their counterparts within the Granite State. Per capita
retail gross sales in New Hampshire border counties ($19,644) outperform per capita
retail gross sales in Maine border counties ($11,962) by almost $7,700 per individual.
Establishing a LOST in Maine would solely develop this disparity.
And whereas LOST
proponents declare the tax is a option to offload the state’s tax burden on
vacationers, our residents pay for these providers as effectively. In line with Maine
Income Providers, about 70 p.c of meals gross sales and 30 p.c of lodging
gross sales are paid for by Mainers. Proponents additionally declare that the income generated
by a LOST would assist cut back municipal property tax burdens. Nonetheless, nothing
inside current state regulation or the language of LD 1254 requires municipalities to
offset or cut back property tax collections by establishing a LOST.
In different phrases,
there isn’t any assure the income it generates would offer significant property
tax reduction within the jurisdictions that enact them.
The complete temporary
might be learn here.