Equipment tax appears doomed

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AUGUSTA – A compromise struck Tuesday has set the table for the elimination of the local tax on business equipment.

A top priority for the leadership of both parties in the House and Senate and Gov. John Baldacci, a move to eliminate the tax has been stuck in the Taxation Committee where members have been hashing out details to mitigate the effects on towns and cities.

With a 12-1 vote, the committee found a middle ground that people on both sides of the issue say they can support.

“Both sides had to swallow hard on the deal,” said Sen. Ethan Strimling, D-Portland, who sits on Taxation and has been skeptical of ending the tax. “There were fundamental pieces we had to fix, and we’ve fixed them. We’re not sacrificing the municipalities and the state is stepping in where it needs to.”

According to members of the committee, the deal provides greater protection to service center communities and mill towns and requires the state to accept greater financial responsibility for reimbursing localities for lost revenue.

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 for the remainder of their eligibility. As part of the compromise, retail business equipment will still be taxed. In addition, the new language creates a complicated reimbursement program that will direct more state money toward mill towns and service centers, the communities that had the most to lose from an elimination of the tax.

“It is much better than the (original bill),” said Ruth Marden, the town manager of Jay, who has been a vocal opponent of the elimination of the business tax. Her community relies heavily upon it as a source of revenue. “The impact now is not going to be a severe as I had feared.”

If the Legislature lives up to its obligations, Marden said, the harm to mill towns will be reduced. “I’m feeling better, but I’m not feeling great.”

Marden said communities aren’t likely to feel any immediate effects from the change. “It’s going to be a few years out before we can see what the real impact is going to be, but there’s definitely going to be an impact.”

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. Opponents of the bill decry the uncertainty of the reimbursement program, which has been cut in the past by the Legislature when money has been tight. The uncertainty, they say, discourages new investment in the state.

“This proposal will encourage business growth, preserve current jobs and generate more good-paying jobs,” said House Speaker John Richardson, who supports eliminating the tax. “This was a difficult issue to resolve. We came to a bipartisan agreement through a good faith effort by Republicans and Democrats and the independent House chair of the committee.”

Rep. David Bowles, R-Sanford and the Republican leader in the House, agreed with Richardson’s view. “I would have to say the amended version of the bill is frankly a better product. It satisfies the desire of the business community to make investments without being punished and it protects communities.”

The bill could come up for consideration in the House today, and leaders on both side of the aisle said they don’t expect much of a floor fight.

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