Maine’s numbers game

The Maine Legislature’s recent obsession with being “first in the nation” in business regulation matters, in increasing taxes and in initiating novel, new programs has come home to roost, in spades.

The Small Business Survival Committee, a nonprofit small business advocacy group in Washington, D.C., has placed Maine 48th among the states in being friendly to small business. The Pine Tree State managed to struggle ahead of Rhode Island, Hawaii and the District of Columbia to avoid last place.

Only a week before, The New York Times – quoting U.S. Census data – reported that Maine led the nation in the percentage of per capita income paid in state and local taxes.

Various state officials expressed surprise and/or frustration as they attempted to rationalize the findings, but business advocates were not taken aback. The reports only confirmed what they had known for a considerable time; that the halls of the Maine Legislature have become scary places for Maine business, particularly during the reigns of the 119th and the current 120th Maine Legislatures.

If legislators and the governor saw the damning reports coming, a majority of them didn’t show it in the most recent session. Enacted were laws increasing the tax on restaurant “happy meals” and prepared foods; hiking the Maine minimum wage past the federal level; and a virtually incomprehensible – you guessed it – first-in-the-nation plan to combat foreign “sweatshop” manufacturing operations by requiring some Maine businesses to sign good conduct affidavits.

Maine was already first in the nation, or near the top, in Workers’ Compensation costs, liberal family leave rules and retail price controls. Businesses finally got a short rest break. The lawmakers put off until January 2002 measures to expand unemployment benefits to cover employees who choose to work only part-time; to require Maine firms to report all their business contracts to the state within seven days; and to allow municipalities and counties to impose local option sales tax. Also delayed – until a funding source can be found – was a measure to provide Maine with a first-in-the-nation, $6.8 billion, universal health insurance plan.

Perhaps aided by legislative taxing and regulating fatigue, state business associations were able to regroup in the most recent session and temporarily sidetrack proposals to eliminate the carry-back period for net operating losses provision in the corporate tax code; to return lawyers to the no-fault workers’ compensation system; and to make Maine only the second state in the nation to ban biweekly employee pay.

However, the beleaguered business coalition had to fight all the way to a Senate-House conference committee to finally defeat a proposal to require some stores and manufacturers to close on three additional holidays each year while allowing others producing and selling the same products to remain open.

Business interests also had to battle down to the wire to defeat a proposal arbitrarily eliminating retailing from the Business Equipment Tax Reimbursement Program, one of the state’s few economic development incentive programs. The annual legislative assault to eliminate or weaken BETR has caused concern that the uncertainty of the future of the program may make Maine less attractive to firms considering locating or relocating in the state.

Bills to place a 5-cent deposit on cigarette butts and to impose a toilet tax on new developments failed, but not before they garnered Maine some prime-time, national attention in its marathon race with liberal states like Vermont and Oregon for first-in-the-nation bragging rights.

Jim McGregor is executive vice president of the Maine Merchants Association.