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Maine Legislators Proposing Massive 

New Expansion of State Sale Tax

Firewood, Home Heating Oil and Groceries Would be taxed

By: David Deschesne

Fort Fairfield Journal, May 15, 2013

A new State tax law being proposed in Augusta and purported as “decreasing taxes” drips with legislator double-speak as it seeks to expand the sales tax rate in Maine and what the sales tax would be applied to. If passed, there would be sales taxes charged on a multitude of products and services (labor) that heretofore were never charged. Some of the items that would be assessed the new 6% sales tax are groceries, coal, fuel oil, propane and firewood. The State also seeks to tax business and legal services as well as maintenance and other labor service fees.

“Maine's bottom ranking among the state business climates is convincing an increasing number of legislators that Maine's income taxes are simply too high to attract business investment and jobs. The nonpartisan Tax Foundation compares the economic health of the 50 states as measured by a number of important factors. During 2000-10, the ten states with the lowest tax burdens (income, sales, property, and other taxes) had, on average, greater population, employment, and personal income growth than the highest taxed states. Maine has been among the highest taxed states for years,” said Bruce Poloquin, former Treasurer for the State of Maine. “Unfortunately, the personal income, estate, and business tax cuts proposed by the Gang of 11 are more than offset by a dramatic expansion of sales and excise taxes imposed on Maine families and businesses in the plan. Although final figures are not yet available, the net result is estimated to be a $150 million overall tax increase!”

LD 1496, deceivingly named, “An Act to Modernize and Simplify the Tax Code” proposes to reduce state income tax to 4% while eliminating all income adjustments. It promises a “Sales Tax Fairness Credit” against the income tax for the massive new increases in sales tax being proposed.

The bill proposes general sales tax be increased from 5% to 6%, with businesses who collect the taxes receiving a 0.5% cut of the take. The new proposed sales tax would be applied to nearly all consumer purchases with the exception of health care and education, raising about $400,000,000 in additional sales tax revenues annually.

While the specific definitions for the expanded sales tax base will need to be constructed with advisory expertise from Maine Revenue Services, many consumer purchases in the following sales categories would become taxable: amusement, entertainment and recreational services; groceries; coal, oil, gas and wood for cooking and heating; residential electricity; publications; coin-operated vending machines; residential water; personal care services; personal property services (such as lawn care); real property services; elective cosmetic services; funeral services; barber shop, beauty parlor and health club services; cleaning, storage and repair of clothing and shoes; business and legal services purchased by consumers; other professional services purchased by consumers; informational services purchased by consumers; certain transportation and storage services; installation, repair, maintenance and other labor service fees; basic cable and satellite television services; telecommunications services; and meals served in cafeterias and dining halls. The sales tax treatment of leasing and rentals would be revised to be more consistent with the treatment of such transactions in most other states.

While the bill promises to “refund” a portion of those sales taxes to poverty-stricken families at the end of the year with a token “Fairness Credit” on their income tax, those families will be required to front the money at the time of sale to begin with, and not be allowed to opt out of the massive new tax increases. Then, at the end of the year, there is no guarantee they will receive a credit for all of the sales taxes they've paid, since the method for computing the credit is based on a generic, black-box accounting scheme that averages what a person of a particular income bracket might have spent in increased taxes and only pays the credit based on that formula.



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