LEWISTON — Campaign groups aimed at leading debate on the state tax reform law passed last year are beginning to take shape, about three months before Mainers statewide have the opportunity to vote on whether or not to keep it.
The law, which garnered just one Republican vote when passed by the Maine Legislature, would lower the income tax most Mainers pay from 8.5 percent to 6.5 percent. The measure is revenue-neutral, and the income tax reduction is paid for by expanding the 5 percent sales tax to a wider variety of products and services and increasing the meals and lodging tax from 7 percent to 8.5 percent.
The Maine Republican Party led a successful people’s veto campaign over last summer and fall, collecting more than 60,000 signatures to place the repeal question on the June 8 ballot.
Some of the more controversial items that would be added to the sales tax base include the labor portion of auto repair bills, dry cleaning and personal storage rentals. Supporters of the legislation say the expansion of the sales tax would help stabilize the state’s revenue stream and the reduction in income tax would provide much-needed relief to Maine taxpayers.
Because of the people’s veto effort, the law has been suspended pending the result of the June vote.
Charlie Webster of Farmington, chairman of the Maine Republican Party, said the political action committee, Still Fed Up With Taxes, that was formed to collect signatures would continue its work to get the law repealed, but certain business interests have split off to form their own PAC.
“There has been a separate group formed,” he said on Saturday. “We still have Still Fed Up With Taxes, which we think is a bipartisan group. But the business community is not comfortable with that, based on the fact that we’ve been so vocal about it. So they formed their own PAC and I don’t know the name of it.”
During the legislative debate on the tax reform bill, Maine businesses were divided. The Maine State Chamber of Commerce opposed the legislation, but the state’s three largest regional chambers, Androscoggin, Bangor regional and greater Portland, all supported it. Many small businesses file their business taxes as personal income and would likely benefit from the income tax rate reduction.
Supporters of the law have formed a PAC called No Higher Taxes for Maine, which will be led by Kay Rand and Larry Benoit, according to House Majority Leader John Piotti, D-Unity. Rand was the chief of staff for Independent Gov. Angus King, and Benoit served as chief of staff for Gov. John Baldacci when he served in the U.S. House of Representatives; both now work at the law firm Bernstein, Shur, Sawyer & Nelson.
Piotti was instrumental in developing the tax reform package that passed in 2009.
The debate leading up to the vote promises to be sharp.
Webster said the he’s sending out a series of letters to various constituencies that stand to be impacted by the changes to inform them and solicit funds for the repeal effort. A recent letter, aimed at hairdressers, advertised on the envelope that the contents contained “important information about potential new taxes on haircuts.”
The letter described how a previous version of the reform package, debated in 2007, had contained a proposal to charge the 5 percent sales tax on haircuts. But it also warned, “Have no doubt, if we fail to repeal (this law), the Democrats, who have controlled our Legislature for over 35 years, will simply expand the sales tax to other services, including haircuts, plumbing and oil burner repairs.
Misinformation about what is and is not included in the tax package has swirled since last year, but haircuts are not part of the legislation being debated.
Webster defended the letter, which bears his signature.
“Potential new, it says potential new taxes on haircuts. Anyone who doesn’t think that’s in their plans is naïve ,” he said. “We’re going to do a series (of letters) educating the public, but if you read the letter it clearly states that this is a future tax you are going to get, and I truly believe that.”
Webster also said the reduction in income tax would only be temporary, but the expansion of the sales tax would be permanent.
“It’s part of a master plan; there’s no doubt in my mind,” he said. “There’s no way they are ever going to allow this to happen. They don’t support it. They never have.”
Piotti said anything done by the Legislature can be changed by the next group of lawmakers, but scoffed at the notion that Democrats would try to increase the income tax.
“That’s almost an impossible statement to respond to,” he said on Saturday. “Our goal has absolutely nothing to do with some kind of backhanded effort to ultimately raise taxes.”
Democrats sought to provide meaningful tax relief, stabilize state revenues and spur economic growth, Piotti said.
Of the letter, Piotti said it was “couched carefully.”
“It may be factually correct, but anyone who reads it will say, ‘there they are again, they are going to tax haircuts,’” he said. “Tax policy is complicated enough and to have the issues confused by misinformation and at times outright lies doesn’t serve anyone in Maine who is trying to make a rational decision in June.”