AUGUSTA – The Maine House of Representatives voted 89-55 Thursday to approve a bill that would lower the state’s top income-tax bracket from 8.5 percent to 6.5 percent.
That change would be balanced by a broadening of the sales tax.
The vote split largely along party lines, with no Republican voting in favor of the measure and eight Democrats voting against it. Rep. Tom Saviello, U-Wilton, opposed the bill.
Rep. Gary Knight, R-Livermore Falls, a member of the Taxation Committee, traveled throughout Western Maine to promote the legislation, in some cases alongside the bill’s sponsor, House Majority Leader John Piotti, D-Unity. But Knight decided he couldn’t throw his support behind the bill.
“I’d love to vote for a strong tax-reform package; we need it badly,” Knight said. “The majority party knows I want this. I would stand up and be the only Republican if I thought it had all the right ingredients.”
Knight said the tough economy and party politics played parts in his decision.
“Both parties definitely have handwriting on the bill, but our concern was that the input we had this time around was minimal,” he said.
Rep. Larry Sirois, D-Turner, said most legislators would agree that the current income-tax rate is too high.
“The bottom line is $55 million is going to be paid by tourists and nonresidents; that’s $55 million off the backs of Maine people,” he said during the floor debate.
Under the legislation, the 5 percent sales tax would stay even but be applied to a wider array of services and amusements, such as ski lift tickets, bowling and auto repair. The state’s 7 percent meal and lodging tax, currently one of the lowest rates in New England, would increase, among other changes.
Knight said the tax shift would hurt more people than it would help.
“If you get paid every other week, you may see a $6 or $7 or $8 raise; you may not notice it,” he said. “But you will notice when you go in to get your car repaired and you get your $300 bill and see a sales tax applied to it.”
Talk of the package’s effect on small businesses occupied much of the debate. Proponents said because most small-business owners file corporate taxes through personal income tax, the 2 percent rate cut would be welcomed.
“We have done some tremendous work for businesses and this tax-reform package is included in that,” said Rep. Nancy Smith, D-Monmouth.
But some small-business owners only see that they would have to apply taxes to services they never had to before, possibly deterring customers, Knight said.
Rep. Lance Harvell, R-Farmington, said he was voting against the tax package because it would have a negative effect on the ski industry, though the House-approved measure includes tax exemptions on fuel and electricity used for snowmaking.
The Senate will take up the measure Friday, and the vote is expected to be much closer. Even if the legislation makes it to the governor’s desk, there’s no guarantee he’ll sign it.
“You have to look at what’s under the surface, but it makes it tougher to support if it’s a party-line vote,” Gov. John Baldacci said.
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