SHIFTING TAXES

As the Legislature continues to work out the details of a reform that would shift much of school funding from the property tax to the sales tax, the difficulty of finding enough sales to tax becomes apparent. Though the bill, intended to ease the pressure on property taxes, would come before voters incrementally, the final portion of it – actually identifying goods and services to tax – should be discussed up front so that everyone understands what the effect would be.

Sponsored by Sen. Peter Mills and Rep. Bernard McGowan, the reform is an admirable effort to expand Maine’s sales tax base and dramatically lower property taxes by requiring a much larger effort from the state for K-12 school funding. By considering 6 mills of property tax as full school funding for residences – rather than the 10 or 12 or 14 mills many homeowners now pay – the bill would require the state to come up with an additional $200 million. To meet the upcoming Essential Programs and Services school-funding model from the Department of Education, it would need another $150 million annually, for a total of $350 million. It would meet some of that by canceling tax breaks like the Homestead Exemption, the Circuit Breaker Program and the Business Equipment Tax Reimbursement, lowering the total needed to $230 million.

To get an idea of what kind of items would have to be taxed under such a plan, Maine Revenue Services recently provided a list of untaxed goods and services and their potential taxation value. Remove all tax exemptions from construction, for instance, and the state would bring in $18 million. All amusements, such as cable, spectator sports, movies, camps, high-school recreation, bingo and bowling, etc., bring in $29 million. Remove all exemptions from advertising, $29.5 million. Personal services like haircuts, cleaning and funerals, $10 million. After that, believe it or not, it gets more difficult: water delivered to homes, $5.7 million; sales to hospitals, $17 million; home heating, $19 million; interstate phone calls, $12 million; magazine and newspapers (horrors!), $5 million. Maine Revenue provided a total of $323 million in potentially taxable areas, but the ones that might draw enough support to pass don’t come near the required funding.

Lawmakers deserve credit for taking on the difficult job of re-thinking a tax structure that no longer works very well, and the public should encourage them to continue examining the way Maine distributes its tax burden. But their numbers do not add up yet.