Maine to decide on Local Option Sales Tax, policy groups say it hurts low-income people most

Rep. Michael Sylvester. Photo courtesy Maine Legislative website

AUGUSTA – Whether you look at data from the left-leaning Institute on Taxation and Economic Policy or conservative think tanks and policy organizations, one thing is clear, the Local Option Sales Tax impacts people with lower incomes the most.

Recently, Democrat State Representative Mike Sylvester of Portland announced he would be introducing a bill to allow Maine municipalities to institute a Local Option Sales Tax (often abbreviated as LOST), in the upcoming session of the Maine Legislature.

While Sylvester appears to be trying to bill the proposal as a “tourist tax”, tax policy groups say LOST actually is the most regressive type of tax, because the only people who can’t escape paying it are those without the means to travel and make purchases at a lower cost – while taxpayers of greater means can simply go make the purchase in a community that doesn’t have a local sales tax.

Rep. Sylvester told the Portland Press Herald that for his city, instituting a LOST would generate about $16 million, but is unclear how much of that burden would be carried by low-income Portland residents who can’t escape to nearby communities such as South Portland, Scarborough or Westbrook to buy clothing, home goods or taxable grocery products.

The Institute on Taxation and Economic Policy, one of the left-leaning groups that says LOST is a regressive tax that disproportionately hurts the poor, actually credits Maine for having one of the top ten equitable tax structures in the nation.

But lawmakers who want to extract more revenue from taxpayers despite Maine’s record levels of revenue and surplus funds can attempt to justify the tax by pointing to the fact that Maine’s sales tax is among the lowest in the nation. According to the Tax Foundation, Maine ranks 42nd in the nation for sales tax, at 5.5%.

Media reports indicate that Portland’s Mayor, Ethan Strimling, supports the proposal to add a Local Option Sales Tax in Portland, and that a coalition of Maine Mayors are behind the proposal. But Senate Republican Leader Dana Dow has blasted the proposal, saying it would hurt local economies and pit communities against one another.

Opponents of LOST are likely to try and force Rep. Sylvester, Mayor Strimling and other supporters to square their political claims that they want to protect low-income residents and close the inequality gap with their desire to impose a new tax that even liberal policy groups say hurts low-income people the most.

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