King vetoes broadcasters bill, cites expense

AUGUSTA – Gov. Angus King has vetoed a bill that would give a tax break on equipment purchases to broadcasters in Maine, saying the measure is overly broad and too expensive.

“The original intent of L.D. 457 was to provide an exemption for equipment necessary for television stations to convert their systems to digital signals as mandated by the Federal Communications Commission,” King wrote to lawmakers. “Although the bill I am returning to you does provide this exemption, it goes much further, ultimately providing an expanded exemption for equipment used in generating all radio and television signals. This exemption will also apply to certain cable television broadcast equipment.”

The cost of that exemption is about $2 million starting July 1, 2003, according to King. Suzanne Goucher, executive director of the Maine Association of Broadcasters, said she disagrees with that estimate and with some of the “facts” cited by the governor.

“We are deeply, deeply disappointed at the governors veto,” she said. “All we are looking for is tax parity. We first sought this in 1999, and most of the Legislature agreed with us.”

Goucher participated in a telephone conference call with King earlier this week to try to answer his concerns over the measure that would exempt equipment purchased by broadcasters from the 5 percent sales tax. She said the printing presses owned by newspapers have been exempt from the sales tax “for years,” and broadcasters contend the equipment used by their industry deserves the same tax treatment. The Legislature’s Taxation Committee unanimously agreed.

But in his veto message, King rejected that argument.

“L.D. 457 proposes to modify the current sales tax exemption for production machinery. The intent behind that existing exemption is to avoid pyramiding, whereby equipment used to produce a product for sale is exempt from sales and use tax since the product will ultimately be subject to tax at some point,” King wrote lawmakers. “Radio and television stations are not involved in producing a product for sale. The product they produce is a signal and would not be subject to an eventual sales and use tax.”

King also expressed concern over the impact of the measure on the state’s projected structural budget gap. That gap is the difference between anticipated state revenues and expenses state officials are projecting for the two-year budget that starts July 1, 2003. According to some estimates, expenses could be more than $500 million greater than anticipated revenues.

He also said the original $1.1 million price tag on the bill as estimated by the state was too low. King said the way the measure is written, cable companies would also receive the tax break, thereby increasing the cost to closer to $2 million.

“If that was a concern, why wasn’t it brought up when the bill was being drafted,” Goucher said. “We clearly wanted the bill to apply to broadcasters, not cable.”

Goucher questioned the cost of the exemption estimated by Maine Revenue Services. The state agency estimated the two-year cost at $1.1 million for broadcasters, but Goucher said it is closer to $650,000.

“I am at a loss to figure out where they came up with their numbers,” she said.

But MRS Executive Director Tony Neves defends the estimates. He said his agency carefully develops its estimates based not only on industry numbers, but on figures from independent sources.

Lawmakers return to the State House on April 24. A two-thirds majority of lawmakers in both the House and Senate will be needed to override the veto.

Goucher has no idea if there are enough votes in the two chambers to override King’s veto, but she vowed the issue will not go away.

“If we don’t have the votes,” she said, “we will be back next year.”