Council reviews state’s proposed tax reform plan
Photo courtesy of TAMC
STATE, REGIONAL AND COMMUNITY leaders joined TAMC officials Monday in ushering in a new energy era in Maine at an official valve-turning ceremony marking TAMC’s lead as the first in Maine to heat and cool a facility using compressed natural gas.
Participating in the event were, from left: James McKenney, TAMC vice president for diagnostic and support services; Tim Doak, TAMC facility engineer; Robert Dorsey, Aroostook Partnership for Progress president and CEO; Brian Doyle, Governor’s account executive, Maine Department of Economic and Community Development; Jack Barry, American Hospital Association, New England regional lead; Gene Lynch, vice chair, TAMC board of trustees; Sylvia Getman, TAMC president and CEO; Maine State Rep. Robert Saucier, District 5; Phil Bosse, area representative for U.S. Sen. Susan Collins; Sharon Campbell, area representative for U.S. Sen. Angus King; Barbara Hayslett, district representation for Congressman Michael Michaud; Chris Green, Mechanical Services, Inc.; and Matt Smith, XNG.
By Kathy McCarty
PRESQUE ISLE — A tax reform bill currently being scrutinized by lawmakers in Augusta — LD 1496: An Act to Modernize and Simplify the Tax Code — was the main topic of discussion at City Council’s special Monday night meeting.
City Manager Jim Bennett, who attended a formal hearing in Augusta last Friday, provided councilors with more details on how the bill — proposed by the bipartisan Gang of 11 — would impact city and local property owners, including businesses, residential and nonprofits. He provided councilors with a spreadsheet on the impact changes would have on different municipalities’ property taxes.
According to a draft of LD 1496, the bill would overhaul Maine’s tax code and is designed to raise a larger share of tax revenues from non-residents, while relieving the tax burden on year-round residents. The bill would raise the Homestead Exemption from $10,000 to $50,000, reduce state income taxes and corporate income taxes, and increase sales taxes, among other changes.
“Our revenue sharing would actually go up compared to our current rate. Our tax rate would go from 23.5 mils to 24.84. But there would be an average net drop in taxes per home,” up to a point, said Bennett.
A home with an average value of $100,000 could see a tax reduction of about $830, noted the city manager.
“A home valued at $150,000 would pay on a higher mil rate,” said Bennett, but would still see a reduction in taxes of about $766.
Non-Homestead property tax rates would increase, said Bennett.
“In this equation, a $100,000 non-exempt property would see a $127 tax increase,” he said.
Councilor Craig Green asked Bennett what his take on the bill was, given the number of “players who weren’t excited about it” during last week’s meeting in Augusta. Bennett said several options were discussed but no clear choice was evident.
“I think people believe some version of this” will pass, said Bennett. “But LD 1496, as proposed, probably isn’t going to make it.”
Among the concerns were the impact raising the state’s sales tax would have, both on tourists and Maine citizens. The general sales tax would increase from 5 percent to 6 percent, the service provider tax rate would increase from 5 to 6 percent and the cigarette tax would increase from $2 to $3.50 — with other tobacco products taxed equally with cigarettes. The prepared meal tax would increase from 7 to 8 percent, with the definition of “prepared meals” expanded. The tax rate on lodging would increase from 7 to 8 percent, plus an additional 2 percent to be allocated to the tourism promotion fund.
“There is what they call a sales tax fairness credit. A family of four making under $40,000 wouldn’t pay (income) taxes. They’d be eligible for a $1,000 check from the state to reimburse for items of necessity” when they filed their taxes, said Bennett. “But one criticism to that was ‘how do those without money pay prior to reimbursement.’”
Bennett said there was also concern from the business side, since the proposed plan would increase taxes on things like wine and beer, as well as increase certain excise taxes.
Councilor Dick Engels acknowledged his business would be impacted, since taxes would be applied to certain services, including those related to real estate transfers.
“I’ve tried to read very carefully all the information on this. It’s true it’s very complicated. The devil’s in the details. We can look at it as a package. Lawmakers can tinker but can’t make significant changes without it all falling apart,” said Engels. “If I were in a position to recommend, I’d enact as soon as possible and have a sunset revision in place for two years.”
Bennett said generally anything of this magnitude “won’t pass a second year of legislative sessions, due to everyone running for office.”
“I don’t shop around where I want to go based on lodging taxes. Maine has great places regardless of lodging taxes,” said Green. “I think allowing some of the tourists to help with the budget is a good proposal. As a package, I like the concept and idea.”
Bennett said another criticism he’d heard was the loss of tax deductions.
“If we go to a flat tax system, you’ll lose a lot of your deductions: mortgage interest, college interest. You will not have those deductions on a flat tax system,” said Bennett.
The bill repeals nearly all income tax deductions, including deductions for home mortgage interest, real estate taxes paid, medical and dental expenses, charitable contributions, theft and casualty losses, other itemized deductions, affordable housing, Social Security benefits taxable at federal level, contributions to capital construction funds, premiums paid for long-term health care insurance, pension income and contributions to 529 qualified tuition plans.
Changes would also impact some nonprofits. The bill amends the property tax exemption for certain private non-profit institutions and organizations. The full 100 percent exemption would be retained for the first $250,000 in value. The exemption would be reduced from 100 percent of the value of the property to 75 percent for the portion exceeding $250,000. The full 100 percent exemption would be retained for places of worship, and the tax treatment of parsonages would be unchanged from current law.
“Because Presque Isle is a combination of high tax-exempt properties and the remaining properties have one of the highest tax rates, we’d tend to benefit more from the proposal but the tax rate will go up,” said Bennett.
Discussion concluded with councilors advised Bennett to pass along to the panel their conceptual interest in the plan as it’s currently proposed.