AUGUSTA — Maine cities and towns would have a chance to add a 1 percent sales tax to meals and lodgings sold within their borders if a bill approved narrowly by the Legislature’s Taxation Committee moves forward.
The bill, sponsored by Rep. Mike Sylvester, D-Portland, would bring about $3 million a year to that city. Under the measure, the meals and lodging tax increase would have to be approved at the ballot box by local residents.
The bill, passed on a 7-6 vote by the committee last week, is a pared-down version of the original proposal, which would have allowed municipalities to collect up to a 1 percent tax on all goods and services sold within their borders.
The bill gained support after it was amended by Rep. Steve Stanley, D-Medway, to direct 25 percent of tax revenue to the Maine Rural Development Authority to be doled out in the form of grants, even to towns that don’t elect to have their own local option sales tax.
Stanley said that for many small towns, a local option sales tax on just meals and lodging would be meaningless or virtually meaningless, but funneling tax revenue from larger communities into rural development programs could be beneficial.
The “local option” sales tax has been perennially sought by municipalities and rejected by the Legislature. The committee’s narrow vote in support puts the measure the closest it has ever been to becoming law, said Portland Mayor Ethan Strimling, a former legislator.
Strimling said in an interview Friday that he was hopeful the bill will get the support it needs to pass into law.
“I think every municipality should be allowed to do this based on what they want to do,” Strimling said. “If the voters of the (city) want to add a penny to the sales tax, they ought to be able to do that.”
Supporters say the bill would help reduce dependence on the property tax while exporting some of a municipality’s costs to non-resident visitors or tourists. Supporters also point out that state government has consistently failed to comply with a law that requires the state to share 5 percent of sales and income tax revenue with cities and towns.
But opponents, including Sen. Matthew Pouliot, R-Augusta, a member of the Taxation Committee, said there is no guarantee of property tax relief because the bill doesn’t direct new revenue to a specific property tax-relief program.
“If you are not a service center community and you are south of Bangor you get nothing, zero, I just want to make that point and I hope people understand that,” said Rep. Bruce Bickford, R-Auburn, another member of the committee.
Pouliot said he could support the bill if there was some guarantee he could provide to property taxpayers in his district that the measure was going to lower their taxes.
“The people who have been championing this bill have been unwilling to stand up here and say they will put this in for guaranteed property tax relief,” Pouliot said. “Short of that, this is just another blank check to the municipalities.”
But Strimling said there’s little doubt that every cent a city gets from someplace besides the property tax reduces the pressure on the property tax.
“There just is no question about it and this $3 million, if it would have come in, it would have provided tremendous relief,” Strimling said. He said the city’s total budget, including schools, was nearly $350 million, with about $200 million of that coming from property taxes.
Outside of Portland, smaller cities in coastal tourism areas could also benefit from the bill.
Belfast Mayor Samantha Paradis said her city is currently trying to cut spending in every department by 10 percent to avoid increasing property taxes. That could involve doing less road repair, paring back the city’s capital improvement budget and reducing the amount of training provided to paramedics, among other things.
She said reductions in state revenue sharing have cost her city an average of $548,000 a year over each of the last five years, while having a local option sales tax for meals and lodging would bring in an estimated $272,344.
Like Strimling, she said any extra revenues from the tax would offset dependence on property taxes.
“This would help ensure we can have essential services for our community,” Paradis said. “Whether it’s ensuring that our moorings are inspected every year to ensuring that our paramedics get the training that they need.”
A bipartisan group that included mayors from several other Maine cities also offered their support for the local option tax during a public hearing on the original bill in March.
The bill is structured so that the money taken in would cover the administration and collection costs of Maine Revenue Services, the state tax agency.
The Taxation Committee also amended the bill so it would not go into effect until July 2021, to give the revenue service time to prepare while also giving municipalities a chance to debate the local option sales tax with their residents.
The full Legislature, starting in the House of Representatives, is expected to take up the bill this week or next.
Send questions/comments to the editors.
