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GOP Legislative Leaders Urge Governor to Veto Tax Rebalancing Bill

AUGUSTA – Republican legislative leaders Sen. Kevin Raye and Rep. Josh Tardy today called on Governor Baldacci to veto LD 1088, the tax rebalancing bill that passed last week along partisan lines in both bodies of the Legislature.

“LD 1088 is not a good deal for Maine,” said Rep. Tardy (R-Newport). “It raises taxes on more than 100,000 Maine families and creates additional burdens for small businesses trying to hang on in this economic turmoil. It also will be very hard on older Mainers living on fixed incomes. They will get limited benefit from an income tax reduction but will feel the full brunt of the additional sales tax on a huge range of services. I believe the governor should veto this bill.”

Sen. Raye (R-Washington) emphasized the negative impact on employment. “At a time when we are experiencing job losses at an alarming rate across the state, it is unbelievable that the Legislature voted to raise taxes on so many small businesses who tell us that these proposed new and increased taxes threaten their survival in this bleak economic climate,” he said. “It flies in the face of the often-stated goal of ensuring a better climate for Maine’s small businesses.” He noted that a survey of Maine members of the National Federation of Independent Business found 82 percent oppose the change.

LD 1088 lowers Maine’s income tax rate and expands the state’s 5 percent sales tax to a extensive range of services that have never been taxed before. The bill also raises the meals and lodging tax from 7 percent to 8.5 percent, jacks up the tax on candy from 5 percent to 8.5 percent and taxes auto rentals at 12.5 percent.

But the largest impact involves the sales tax on scores of ordinary and often essential services, including car repair, house cleaning and boat mooring, along with admission fees to movies, sporting events and exhibitions such as home and boat shows. Golf greens fees and ski lift tickets would also be taxed.

Rep. Tardy said the timing for such a massive tax overhaul could not be worse. “With this deep recession and continuing erosion of state revenues, this is the worst possible time to do radical surgery on our tax structure,” he said. “It is inconceivable that we could predict revenues considering economic conditions and consumers’ reaction to the tax increase.”

Sen. Raye said that ramming this bill through in a partisan fashion mars the reputation of a Legislature that has otherwise been distinguished by a constructive bipartisanship approach.

“I hope the governor will veto LD 1088 so that during the next legislative session we can enact true bipartisan and effective tax reform that does not impose new job-killing burdens on small businesses,” he said. “The Taxation Committee has carried over to the next session LD 1279, Sen. Jon Courtney’s bill dedicating the future growth in state revenues to buy down the income tax rate from the current 8.5% to just 4.5%. That approach reflects the unanimous bipartisan recommendation of the Joint Select Committee on Prosperity, and offers a far more rational way to lower Maine’s income tax rates.”

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