New sales tax lurking in Maine Legislature, study says it will hurt low-income Mainers most

Rep. Michael Sylvester (D – Portland) is the sponsor of LD 1254, which would create a Local Option Sales Tax (LOST). A new study says it would be “harmful to those who already live in poverty.”

AUGUSTA – LOST is the acronym used to describe one of the remaining tax increases that is still lurking in the Maine Legislature. Billed as a tool to feed more revenue into local governments, a new study from the Maine Heritage Policy Center says passage of the LOST in Maine would disproportionately harm low-income Mainers.

LOST stands for “Local Option Sales Tax”, and the study from MHPC was conducted with L.D. 1254, sponsored by Rep. Michael Sylvester (D – Portland) a self-described socialist who was appointed as chair of the Maine Legislature’s Labor Committee. The bill is cosponsored by a group of liberal Democrats.

L.D. 1254 would ostensibly fund opioid treatment programs with a new tax on meals and lodging, but it is unclear exactly how or what programs would benefit. The language of the bill doesn’t specifically require towns and cities to use the money they would collect through a LOST for opioid treatment. Instead it says they must identify how the money will be used when putting the issue out for a local referendum.

The bill also towns do not get to keep all of their new LOST revenue. It requires towns to send 15% of the revenue to the state of Maine to be redistributed to towns without a local option sales tax.

Along with saying low-income Mainers would be hurt by the LOST, the MHPC study says that this type of tax increases cross-border shopping significantly. Despite claims from some politicians that a tax on lodging and meals is effectively a “tourist tax”, MHPC says 70% of meals and 30% of lodging purchased in the state of Maine is bought by Mainers.

Even with the knowledge that the proposal would have a major impact on Mainers as well as tourists, MHPC says raising taxes on meals and lodging is counterproductive.

“For a state whose official slogan is “Vacationland,” it would be counterproductive to increase a tax that individuals would pay when they choose to stay here,” says the study.

MHPC also says implementation of LOST in some municipalities would harm businesses in those communities. Studies show people will travel to communities nearby that do not have a LOST to avoid the tax, sometimes as far as 31 to 38 miles. The study suggests that a LOST can reduce demand by 10 to 14 percent in municipality subject to the tax, which would have a major impact on many businesses.

For all these reasons, MHPC suggests that the LOST tax should be shelved by the Maine Legislature. According to their study, it would only generate significant revenue for about ten large municipalities with major retail bases and those municipalities mostly have a higher percentage of people living in poverty than the statewide average.

That translates into a regressive local tax that disproportionately harms those that supporters of the LOST claim they want to help, or as the MHPC summary says, LOST would be “harmful to those who already live in poverty.”

The bill being considered is sponsored by Rep. Michael Sylvester (D – Portland) and cosponsored by the following legislators:

Senator Ben Chipman (D – Portland)
Rep. Richard Farnsworth (D – Portland)
Rep. Victoria Foley (D – Biddeford)
Rep. Thom Harnett (D – Gardiner)
Rep. Chris Kessler (D – South Portland)
Rep. Matt Moonen (D – Portland) – Assistant Majority Leader
Rep. Margaret O’Neil (D – Saco)
Rep. John Schneck (D – Bangor)

When the Maine Legislature’s Committee on Taxation held public hearings on the proposal earlier this year, a number of groups and individuals testified on the bill.

Among those testifying in support were: Maine School Management Association; Maine Center for Economic Policy, Maine Equal Justice and the Maine Service Center Coalition.

Among those testifying in opposition were: National Federation of Independent Business; Maine State Chamber of Commerce; Retail Association of Maine; Maine Tourism Association; Hospitality Maine; Maine Heritage Policy Center and the Roost Cafe and Bistro.

You can read more about LD 1254 and view public hearing testimony by clicking here.

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