At the State House, the talk has turned to taxes, as inevitably it would.

Gov. LePage, whose budget proposal cut $425 million from municipal funding and property tax relief, insists towns and cities must work harder at saving money. But cuts on this scale won’t work – not when most towns are adopting budgets while the state’s just getting started.

Maine’s municipal aid system, which constitutes nearly half the state’s budget, may need an overhaul – but LePage hasn’t made that case. He’s just declaring his budget plan “balanced,” and dumping the problem on someone else – legislators and municipal officials.

It’s not going to be easy. Tentative comments from Senate Assistant Republican Leader Roger Katz suggest raising the lodging tax – currently 7 percent, the lowest in the nation for states with such taxes; New Hampshire and Vermont both charge 9 percent.

Here’s the bad news – increasing the lodging tax to 9 percent, by itself, would raise less than $20 million.

The present crisis was caused by the Legislature’s decision in 2011 to enact a big tax cut – “largest in Maine history,” we were told – but make it effective only two years later, that is, now.

The theory was that we’d grow into this tax cut, that revenues would be perking along. The hard reality – revenues have grown not one thin dime, leaving a $400 million gap from the tax cut that, just about the size of LePage’s spending cuts.

The logical thing would be to suspend the tax cuts until revenues really do start growing. But there are problems with that, too. The income tax cuts took effect Jan. 1, and rates have never been changed during a tax year.

There’s a further issue. Democrats like income tax cuts almost as much as Republicans. That was, after all, the purpose of their 2009 tax reform plan that lowered income taxes – to 6.5 percent, against the current GOP-led reduction to 7.95 pecent — while extending the 5 percent sales tax to a slew of services.

The difference in the 2009 plan, which Republicans convinced voters to scuttle, and the 2011 plan? The first was paid for. The second wasn’t. And when a balanced budget is constitutionally required, that doesn’t work.

The policy reason for lowering income taxes is that they’re paid only by Maine residents. Most states try to “export” tax burdens to visitors and nonresident homeowners. We do the reverse.

So if income taxes are out, where do we go to “export” the burden? To the sales tax. Here, we have a bit of luck. Although you’d never know it to listen to our elected leaders, Maine has one of the lowest sales tax rates in the country. In New England, New Hampshire famously has no sales tax, but Rhode Island charges 7 percent, Vermont 7 percent with a local option added, Connecticut 6.35 percent and Massachusetts 6.25 percent.

We could set the sales tax at 5.5 percent for two years and gain $100 million in revenue. Add restaurant meals to the 9 percent lodging tax – yes, if you can afford to eat out, you can pay an extra 2 percent — and you pick up $60 million.

I would also bring cigarettes and alcohol into the picture. New Hampshire will likely raise its cigarette tax to $1.88 or $1.98 per pack, and with ours at $2, we’d have room for a 50-cent increase, still low for New England. Believe it or not, alcohol taxes haven’t been increased since the 1980s, and they should be, given the damage these habits do to health and families.

The cigarette increase would bring in $32.5 million while deterring youth smoking, and we could gain $17.3 million by doubling alcohol taxes. The total: $210 million – in the range for what will be needed. No one believes municipal aid will be restored to previous levels; not under this administration.

Higher taxes, in these circumstances, are a better deal than further erosion of public services. The problem started under Gov. John Baldacci, who expanded Medicaid benefits and accepted an unwise referendum plan to increase school aid, but never asked for a tax increase to balance the increased spending. And Maine is now taking in less money than it did in 2007.

Lawmakers have an unenviable job of explaining this to constituents, so they’d better get started. They can’t adjourn with the budget in its present state, and there are no alternative cuts available. Increasing taxes is never easy, even temporarily, but we’ve done it before.

Douglas Rooks is a former daily and weekly newspaper editor who has covered the State House for 25 years. He may be reached at [email protected].

The sales tax was 6%, then 5.5%, from 1991-97, the last good decade for the Maine economy. There will be no help from the governor’s office, but everyone else, from both parties, had better start talking.

Douglas Rooks is a former daily and weekly newspaper editor who has covered the State House for 28 years. He can be reached at [email protected]

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