Tax overhaul plan hits GOP opposition

AUGUSTA – The uncertainty over the prospects for passage of a sweeping proposal to lower Maine’s income tax and broaden its sales tax was underscored sharply Tuesday as the Senate Republican leader put her caucus on record in opposition.

“When the state mandates higher costs for goods and services, sales are naturally going to drop off,” Senate Minority Leader Carol Weston, R-Montville, said in a statement. “In no way does this plan foster business development or encourage job creation, and it certainly doesn’t provide real tax relief for the people of Maine.”

Weston’s statement was released shortly after the Senate, narrowly controlled 18-17 by Democrats, in effect voted to let debate on two fronts open in the House of Representatives.

Reaction to Weston’s declaration among House Democrats, who hold an 88-60 edge over Republicans in a chamber that also has two independent members and one vacancy, fluctuated between shrugs and frowns.

“I find it surprising that their office would come out so strongly against a process that one of their leaders was so involved in,” said House Majority Leader Hannah Pingree, D-North Haven.

The GOP leader Pingree referred to, Sen. Richard Nass of Acton, was a key negotiator on a Taxation Committee that produced strong majorities for two pieces of what proponents call tax reform legislation.

Nass acknowledged Tuesday that he did not have a lot of backing from his Senate Republican colleagues for the tax system overhaul he has signed on to, but did not concede the battle.

“It’s going to be a struggle, no doubt about it. … We’re trying to make the information available.”

A so-called statutory package to overhaul the tax system, finally ready for House consideration, would lower the top income tax rate in the current multitier system from 8.5 percent to a flat 6 percent for all. It also would hold steady the general sales tax at 5 percent, but expand it to include numerous goods and services.

To provide property tax relief, a homestead exemption would be increased, with the state funding half, and a property tax and rent rebate program known as the circuit breaker would be expanded.

A separate package of constitutional amendments, including one to establish super-majority thresholds for the approval of changes in certain taxes, came up in the Senate for the first time Tuesday and was procedurally moved along to the House without debate or recorded vote.

House consideration of one or both packages, which some lawmakers see as linked, could come as soon as Wednesday.

As business opposition to a sales tax broadening has spread, supporters of a tax system overhaul have sought to highlight estimates by state revenue officials of the big share of Maine residents who would stand to benefit financially.

“We’ve got a lot of work to do,” said Democratic Sen. Joseph Perry of Bangor, a co-chairman of the Taxation Committee.

House Speaker Glenn Cummings’ office set up several computerized tax calculators at the State House and Senate Democrats said one was being posted on their majority office Web site.

Maine Revenue Service says the revenue-neutral package would cut taxes overall for Maine residents by a little more than $140 million, largely by shifting some of the current tax burden to out-of-state taxpayers.

An analysis by state revenue officials says the overall plan would generate tax decreases for nearly 624,000 families, while about 75,000 families would experience tax increases.

Shifting more of the current tax burden to out-of-staters would result in the overall reduction for residents, with winners realizing an average tax decrease of $338 and losers realizing an average tax increase of $413, according to the Maine Revenue Services analysis.

Maine Municipal Association members received an update Monday that said the package “moves Maine’s tax code from its heavy reliance on Maine residents’ income and property values and ‘exports’ $140 million of that annual burden onto non-residents.”

The MMA analysis went on to say, “Within the overall revenue neutrality of the package, the relief to Maine residents is provided primarily by reducing the income and property taxes that Mainers pay, and then covering those reductions in state revenue by expanding the base of the sales tax [which both residents and nonresidents pay] and by increasing the rate of the Real Estate Transfer Tax, which is also assessed against nonresidents in no small measure.”

Weston, in her State House statement, raised questions about the way the overhaul proposal had been brought forward.

“This is a major piece of policy with potentially severe implications for the people of Maine, particularly in the rural regions of the state,” she said.

“For the longest time this tax reform plan has been slowly traveling through the State House, hiding behind budget negotiations and school consolidation debates, waiting for the right moment to appear out of the shadows,” Weston said.