Maine Voters Refuse to Lower Income Tax by Expanding Sales Tax to Include Services Such as Self Storage

Although observers say that the people of Maine are in favor of tax reform generally, on Tuesday Maine’s voters rejected tax reform legislation for the fifth time in six years. In a 61 to 39 percent vote, Maine residents rejected a state tax package that would have lowered income taxes while broadening sales taxes to cover dozens of items, including self storage, that were not previously taxed. (The vote will not affect federal income taxes, only Maine’s state income tax and sales tax.)

The tax reform legislation that was voted on this week was originally passed by Maine’s legislature and signed by Governor John Baldacci last year. It would have lowered state income taxes for most Maine residents by 24 percent. This week’s vote repealed the new law.

Maine’s taxes, in general, are considered to be fairly high. Maine’s tax burden is the seventh-highest in the nation. If the new law had remained in place, Maine’s tax burden would have dropped to somewhere in the middle, nationwide.

Supporters of the tax reform legislation argued that most of the new tax burden, the burden created by expanding the sales tax, would have fallen on tourists. But opponents said it would hurt the average resident of Maine as well, forcing them to pay taxes on all sorts of everyday purchases, including self storage unit rents, hair cuts, movie tickets, home cleaning, and car repairs. The tax on restaurant meals and hotel rooms would also have increased.

Republican David Trahan of Waldoboro said in yesterday’s Bloomberg Businessweek that the tax package was too complex, that it was full of “gimmicks and unintended consequences.” Charles Webster, chairman of the Maine Republican Party, agreed, saying “This was a repudiation from the voters -- people who cut hair and drive trucks, people who are plumbers, people who paint cars, regular working-class people -- that they’ve had enough.”

Meanwhile, Democrat Joe Perry of Bangor, commenting in the same article, challenged Republicans to come up with a tax reform package that they can support. “We’ve been over 40 years without an overhaul while every other state in the nation shifts their tax burden exactly the way we tried to,” he said in frustration.

Governor Baldacci said on Maine Public Radio that he believes Maine’s income taxes will still have to be reduced. But, he went on, it’s now clear that income tax reductions will have to occur gradually, in small increments, rather than in one sweeping tax reform package.

Sources used:

Canfield, Clark. “Vote doesn’t mirror Mainers’ desire for tax reform.” Bloomberg Businessweek.  June 9, 2010.

Claffey, Jason. “Feelings mixed over Maine’s repeal of tax reform.” Foster’s Daily Democrat. June 10, 2010. 

“Maine’s governor says he believes the state needs a lower income tax rate in order to be economically competitive.” The Maine Public Broadcasting Network. June 10, 2010.