The Return of the Snack Tax

From hot cocoa to roasted nuts, advent of the new year has ushered in a sales tax on these and hundreds of previously exempt food items. Though the expanded levy still exempts grocery basics, the changes are a reminder that ever since Mainers first considered imposing a sales tax in the 1930s, the focus of conversation has often been on how much of our appetites would be required to be sacrificed to the cause of paying for schools, roads, police and welfare.

When Maine lawmakers first tried to impose the tax in 1937, it was at one percent but with no exemption for any groceries. As a result, voters killed it off by nearly two-to-one in a referendum campaign that played upon the fear of going unfed.

Having their knuckles rapped by this outcome, the next time they attempted to pass the tax, legislators in 1951 exempted groceries even though the rate on everything else was by now doubled to two percent.

Though by 1969, the overall rate had been incrementally increased to five percent, food items, other than those purchased at restaurants, were still considered untouchable.

This changed in 1991. Backed up against the wall by the most serious government fiscal crisis since the Depression, Augusta increased the overall rate to six percent while at the same time expanding the base to include many edibles. The so-called “snack tax” was an attempt to target the taxpayer’s affinity for cookies and crackers.

The shotgun marriage with taxing more of what we eat didn’t last more than a decade. By 2000, a petition drive garnered the then-necessary 42,000 signatures to force lawmakers to do one of two things: a) voluntarily repeal the tax or b) put it out to referendum. The legislature relented without the necessity of a referendum vote. In the meantime, the tax on other items had been allowed to revert to the 5 percent level.

By 2009, a tax reform package was enacted by legislators that would have, among other things, restored the snack tax to some items. But 61 percent of voters in a statewide referendum the next year said not this time either, even though the same law would have cut income taxes.

By October 2013, when the overall rate went up to its present 5.5 percent snacks were still exempt.

The law that took effect earlier this month was the most comprehensive restoration of snack taxes since the short lived 1990s assessment. It’s one that like the 2009 proposal, however, has been coupled with a reduction in state income taxes. It’s part of a mindset that has emphasized Maine’s role as having one of the highest income taxes, yet one of the nation’s lowest sales taxes. (Even at 5.5 percent we’re the fifth lowest in combined state and local sales tax levies among the 45 states that have some type of sales tax.)

The lifespan of the most recent tax on snacks will, as with previous episodes, depend on whether its palatability will give rise to such voter indigestion as to occasion another petition initiated referendum on the state ballot menu.

Another local government seeks to disband

Among the measures to be taken up by the recently re-convened legislature is one to authorize Oxbow to disband. If approved, the law would then allow the plantation — a local government frequently encountered in northern Maine with attributes similar to a town — upon a two-thirds vote to surrender its autonomy. Residents would, in effect, then be inviting Maine and Aroostook County officials to take over management of its roads, cemeteries, trash disposal and terminate its representation on the SAD 32 school board.

Located about 15 miles south of Ashland and 45 miles northwest of Houlton, Oxbow petitioned the state a few weeks ago to give it the right to pull the plug on its political existence.

With a population now estimated at a mere 53 residents, its apparent desire to become more reliant on the county and state is understandable. The move will come at the price of no longer controlling how property tax dollars generated by its 36-square miles of real estate will be spent, even though tax rates will likely decline. It’s doubtful, however, that given the strains of operating a government with so few people will cause any to invoke Massachusetts legislator James Otis, Jr.’s 250-yea- old declamation, “Taxation without representation is tyranny.”

If the legislature passes the bill this year and local voters reaffirm their desire to de-organize, Oxbow would join over 40 local communities that have done the same over the last century. These include Aroostook County’s Bancroft, which did so just last year, and the Franklin County towns of Madrid in which this occurred in 2000, Salem in 1945 and Freeman in 1938.

Dallas, a plantation that now includes part of the Saddleback Ski Area, attempted this in 1939. Legislation passed in Augusta authorizing a moth-balling of its existence, however, was successfully vetoed by Gov. Barrows on grounds that it had not shown it was in such financial distress as to justify the state and county picking up the slack. Barrows noted that its $44 per thousand mill rate was $13 dollars below the then state average of $57. (Today, the state average is about $14, a figure that has declined due to more realistic property assessment standards.)

Some who have made the de-organization journey have changed their minds and have been reconstituted as towns. This happened to Topsfield — 35 miles north of Calais on Route 1 — which went asunder in 1940 due in part to a defective set of tax liens against its largest taxpayer, but re-organized in 1960.

Unorganized territories in Maine that were never towns or plantations in the first place have also successfully emerged as municipalities in relatively modern times. The town in which Sugarloaf is located did this when, in 1975 it became part of the recently formed Carrabassett Valley, a move which the rapidly developing locality was motivated to make in part by a desire to acquire more autonomy over its land use regulation procedures. The sting of higher property tax rates that accompanied incorporation as a town was blunted by the large percentage of nonresident condo and ski chalet owners who wound up paying them.

Paul Mills is a Farmington attorney well known for his analyses and historical understanding of public affairs in Maine; he can be reached at [email protected]


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