Maine Legislators Consider “LOST”

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Maine Legislators Consider Authorizing Local-Option Sales Taxes

Although most U.S. states permit their local governments to collect certain types of sales taxes (in addition to the statewide tax), about a dozen state still do not. One such state is Maine, which currently assesses a statewide sales tax of 5.5 percent only. But there is a renewed effort in the state’s legislature to authorize local-option sales taxes (LOST), which could provide an additional source of revenue for cash-strapped municipalities.

Bills Would Allow Municipalities to Target Sales Tax Increases During Tourist Season

There are several LOST bills currently pending before the Maine Legislature. One such bill, known as LD 65, would allow municipalities to impose a local sales tax after obtaining approval in a voter referendum. The referendum question would need to include not only the proposed tax rate, the “purposes for which the revenue will be used,” and any months when the LOST would not be collected.

This last item means that the municipality would not have to collect its portion of the sales tax year-round. Rather, localities could focus tax collection efforts on the summer months when Maine typically attracts a large number of tourists. According to the Portland Press Herald, roughly 36.7 million people visited Maine in 2017, spending approximately $6 billion throughout the state.

A second proposal, LD 1254, would allow for a LOST of up to 1 percent on restaurant meals and lodging. Like LD 65, LD 1254 would require a referendum and allow localities to specify the months in which the local sales tax would apply. But while LD 1254 is restricted to “prepared food or the value of rental of living quarters” to travelers, LD 65 permits collection of local sales tax on any item that is already subject to Maine’s statewide sales tax.

Conservative, Liberal Activists Challenge LOST Proposals

Not surprisingly, many conservative anti-tax groups oppose the LOST bills. Jim Fossel, a former staffer for Republican U.S. Sen. Susan Collins, wrote in an editorial for the Press Herald that “the very concept of a local-option sales tax is fundamentally flawed.” Fossel argued it was a “competitive advantage” for Maine not to have such taxes, and that “towns and cities across Maine ought to continue doing what they can to cut costs and constrain spending.”

What’s interesting is that some liberal activists agree with Fossel–at least with respect to opposing the LOST. Sarah Austin of the Maine Center for Economic Policy, which describes itself as a “progressive voice” for “Maine working families,” wrote on the organization’s website, argued legislators should reject LD 65 and LD 1254 as it would disproportionately benefit those “communities heavily reliant on the tourism industry” while “doing little–or even nothing–for others.”

Austin noted that 10 municipalities in Maine generated 45 percent of the state’s meals and lodging revenue, yet only contained 16 percent of the state’s permanent population. And even a general LOST that was not limited to meals and lodging, such as the one proposed by LD 65, would hit poorer Maine residents the hardest. For this reason, Austin said a sales tax increase limited to meals and lodging would be preferable, but only if implemented as part of more comprehensive tax reform, including higher income tax rates for the “wealthiest and profitable corporations.”

 

 

Utah

Local option sales tax considered in Utah

Utah voters likely to consider local option sales tax on gasoline to fund road work

Voters in dozens of Utah cities and counties may soon decide whether to add another quarter percent to their local sales tax. In March, Utah Gov. Gary Herbert signed into law House Bill 362, a broad package of measures designed to fund transportation projects throughout the state. The bill converts Utah’s statewide gasoline tax from a per-gallon levy to a 12% sales tax. This will raise the price of gasoline by 5 cents per gallon when it goes into effect on January 1, 2016. The new law further indexes future increases to inflation, meaning the total sales tax could eventually rise by as much as 15 cents per gallon.Local Option Sales Tax

HB 362 also authorizes each of Utah’s counties to impose an additional sales and use tax of 0.25%. In counties that provide public transit services, 10 cents out of the 25-cent increase would go to the transit authority, 10 cents to the municipalities (cities, towns, et al.) within the county, and the remaining 10 cents to the county itself. If the county does not provide public transit service, the county would keep 15 cents and give the remaining 10 cents to the municipalities.

Individual localities must pass a resolution to implement the local option sales tax. Local voters must then approve the tax increase. According to the Salt Lake Tribune, “at least 55 Utah cities and towns have passed or are considering” such measures for this November’s ballot.

Opponents of the local option sales tax argue any public vote should be postponed until November 2016 to coincide with the next presidential election. The Utah Taxpayers Association noted in a recent press release Salt Lake County officials are “feeling pressure” to ignore a local ordinance requiring any sales tax referendum take place next year in order to placate the demands of pro-tax groups to hold a vote this year.

The potential difference in turnout is not insignificant. According to the Utah Lieutenant Governor’s office, which oversees statewide elections, about 80% of registered voters participated in the 2012 presidential election. That figure dropped to just over 46% in last year’s midterm elections. That figure will likely be even lower this November, when only local offices are on the ballot.

But proponents argue it is important to pass sales tax increases now to fund important transportation projects. One local official told the Tribune her city needed at least $50 million to fund a “wish list” of road projects, which even the upcoming gasoline tax increase would not cover. The Utah Transportation Coalition, a group composed of the state’s major employers, has also pushed for quick votes, arguing localities only have “one-third to one-half the funds they need for transportation infrastructure.”

Conversely, the Utah Taxpayers Association said voters should reject any effort to increase the local sales tax. The association said rather than “hide the cost of Utah’s roads in a sales tax,” officials should follow Oregon’s lead in considering funding transportation projects through a per-mile levy against motorists who actually use the roads.

S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog PrivyCouncil.info