Big reasons to support state’s small businesses

The June 28 article titled “Businesses, artisans decry state changes to tax exemption” displayed for me the growing frustration over Maine’s excessive tax burden. While paying the second-highest taxes in the nation, Mainers and Maine businesses must labor to pay their bills, meet payroll, and attempt to improve their companies. This resale tax change exemplifies how legislative action in Augusta can make or break a small business.

The recent change in the resale tax law cited in the article shows how the current legislative leadership is either completely unaware of the consequences of increasing the tax burden on small businesses, or they simply do not care about the devastating results this policy will have. The law was buried in LD 1919, the Governor’s Supplemental Budget FY 05 that passed by a simple majority vote.

Small businesses are the backbone of Maine’s economy. They are the part-time artisans, craftspeople and micro-businesses that often work out of their garages and basements. These individuals often struggling to make ends meet, but preserver in order to provide for their families.

Old resale certificates, commonly referred to as “tax numbers,” will expire on Aug. 15. Maine Revenue Services will issue new Annual Resale Certificates to active registered retailers reporting annual gross sales of $10,000 or more. Retailers under the $10,000 threshold will not be issued certificates. These certificates allow for individuals and businesses to buy items exempt from sales tax if the item is intended for resale. Additionally, the certificate provides businesses access to wholesalers that only deal with certificate holders.

Maine Revenue Services explains that the new law will generate $1.8 million in new revenue for the General Fund and is designed to curb the fraudulent use of resale certificates. No one would disagree with the goal of the law; everyone should pay his or her fair share of taxes. The problem with the new change is that redefines a “bona fide” business as one that has more than $10,000 in annual gross sales. If a business has gross sales under $10,000 they will not be provided with a certificate.

The change in the law ignores the fact that the individuals most in need of the tax break and access to wholesalers – those incubating a fledgling business – are being denied the benefit that larger competitors will enjoy. For many new businesses, $10,000 in sales is significant.

Many legislators are quick to suggest that there is a pressing need to grow and diversify Maine’s economy and support “small businesses” in order to have good job opportunities for everyone who wishes to work. I couldn’t agree with them anymore. However, when it comes time to put their “money where their mouth is,” so to speak, and make policy decisions that will help foster economic growth those legislators in control vote to adversely affect the economy. It is very disheartening to watch.

The change in the resale law will not make or break Maine’s economy, but it will undoubtedly put some individuals out of business. The change moves Maine in the wrong direction with regard to economic development.

It is amazing how the current legislative leadership lauds the great potential for economic development in a new creative economy and it is this sector of the economy that stands to be significantly hurt. The outcry by some artisans over how the resale law change will increase the cost of their raw materials, beads, wood, canvas, paint, etc., is one that should be heeded. The outcry is the symptom that the current tax system has stretched Mainers’ resources to the max.

The good news for the artisans and the other businesses with concerns over how state policy in hindering economic growth is that they do not have to look very far for the cause of this latest impediment. The current Democratically controlled Legislature supported LD 1919.

It is time for legislators to start supporting small businesses rather than squashing them before they get off the ground. Mainers all want the opportunity to have a good job and it is time that legislative leaders heed that call.

Rep. William Rogers serves in the 121st Maine Legislature representing the people of Brewer. He is a member of the Business, Research and Economic Development Committee.