Business tax axed by House, Senate

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Levy on business equipment clears first tests in the House and Senate

AUGUSTA – The lobbying dollars have flowed, the doomsday scenarios have circulated and the passionate speeches have flourished.

But in the end, the elimination of the business equipment tax flew through the House and Senate on Friday with nearly unanimous support. The Senate vote was 34-0. In the House, it was 123-18.

It’s not the last vote on the matter, but offers a clear indication that the compromise bill developed by the Taxation Committee earlier this week will likely become law.

Under current state law, businesses are taxed locally on the value of their equipment and are then reimbursed by the state for 100 percent of the levy.

The bill would prospectively end the tax on most new business equipment installed after April 1, 2007. Taxes on existing equipment already in the program will continue to be reimbursed by the state. Retail business equipment will not be exempt. The new language also creates a complicated reimbursement program that will help mitigate the effects of the tax’s elimination on mill towns and service centers.

The exact effect on individual communities is not entirely clear and will depend on several factors, including the percentage of the localities valuation that is based on the business equipment.

Initially, communities won’t feel a financial impact because the change only applies to new equipment. Down the road, however, there could be substantial impact.

According to Sen. Arthur Mayo, D-Bath, who said he supported the bill reluctantly, in about four years, one city in his district stands to lose $1 million. “This bill is not a panacea,” he said.

In the House, Rep. Joanne Twomey, D-Biddeford, voted against the bill, calling it a shell game.

“This is nothing more than a tax shift,” Twomey said. “Let’s find out who’s really paying for this. It’s the town. It’s the property taxpayer. There’s no help for them.”

As the vote tally demonstrates, most lawmakers disagreed.

The business equipment tax and the state program that reimburses business for the local assessment has been a high priority target for Gov. Baldacci, Democratic and Republican leaders in the House and Senate and the business community.

The greatest criticism is that the uncertainty of the reimbursement of the equipment tax makes businesses reluctant to invest in the state, and that the tax creates a barrier to new investment when the state is competing against others without a similar tax.

“This bill is important for providing stability and predictability for business,” said Rep. Richard Woodbury, I-Yarmouth.

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