PORTLAND, Maine (AP) — Tax-weary Mainers on Tuesday rejected a new tax reform law that would have lowered the state's income tax rates while placing new taxes on dozens of purchases ranging from car repairs and amusement park admissions to movie tickets and dry cleaning.
The law, which was passed by lawmakers last year but has not gone into effect, would have lowered Maine's top income tax rate from 8.5 percent to 6.5 percent. To make up the difference, the law would have broadened the existing 5 percent sales tax to a laundry list of items that are now exempt. It also would have hiked the food and lodging tax, from 7 to 8.5 percent.
Mainers favored the repeal by a 60-40 margin as numbers were counted late Tuesday.
Supporters of the law said nearly 90 percent of Mainers would have seen their combined income and sales tax payments drop because out-of-state visitors would have paid more of the sales taxes. But opponents said it amounted to new taxes on everyday purchases that would be felt by every Mainer.
Mainers voted against the tax law after they realized how complicated it was and how many purchases would be subject to sales taxes that are currently exempt, said Curtis Picard, executive director of the Maine Merchants Association, which supported repealing the law.
"I think there is a need for tax reform in Maine," Picard said. "But all this law did was pit Mainer vs. Mainer and create winners and losers, and that wasn't a good situation. We need tax reform that's fair for everybody."
Crystal Canney, spokeswoman for the political action committee that supported keeping the law in place, said the election was a missed opportunity for Maine.
"Tax reform is an issue this state needs to deal with," she said. "But we respect the will of the people."
The law, described as the most sweeping change in Maine's tax code since income taxes were adopted in 1969, was designed to be revenue-neutral, but Maine Revenue Services projected it would result in tax savings of $54.3 million for Mainers in 2011 because out-of-state visitors would pay more at restaurants and hotels, for car rentals and for other purchases in Maine.
If the law had been retained, the average Maine family in 2011 would have paid less in income taxes but more in sales taxes — for a combined savings of $77, the agency said.
At a Portland polling place Tuesday, Toby Hollander said he trusted that lawmakers chose the best option in passing the tax overhaul.
"I think the general idea of spreading out the sales tax so that we're not totally dependent just on things that are subject to the recession is a good idea. We've been going through this for years and years and years. This is something that needed to be done a long time ago," said Hollander, who is a guardian for children in the court system.
Linda Cooledge, a lifelong Portland resident who said she's considering moving to Florida because of Maine's high tax burden, voted against the tax law because she didn't want to see taxes expanded to new goods and services.
"Once they've got their hands in our pocket for these little taxes on everything, now they've got the go-ahead to add to it every year. Once the government and the state of Maine has their hand in your pocket, they keep dipping further and further," she said.
Soon after the law was passed, a coalition to repeal the tax law collected more than 60,000 signatures to force a statewide vote.
Maine's business community split over the measure. The Maine State Chamber of Commerce and the Portland Regional Chamber supported keeping the law, but the Maine Merchants Association, the Maine Restaurant Association and other business organizations opposed it.
Associated Press writer David Sharp in Portland contributed to this report.