Maine voters are going to the polls today to decide whether to repeal the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. reform package enacted last year.
Appearing on today’s ballot as People’s Veto Question 1, a “yes” vote will repeal the tax package, and a “no” vote will retain it.
The legislation consolidated Maine’s income tax brackets into a 6.5% and a 6.85% rate (down from a top rate of 8.5%). To recover the funds lost through the income tax reduction, the state sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. was expanded to include a number of new services, including activities such as entertainment and rentals. In addition to broadening the sales tax to include a number of additional services, the sales tax on prepared food and lodging would rise from 7% to 8.5%.
A last-minute gubernatorial change added the second 6.85% bracket and removed some services from the taxable list. On net, the reform package will be a tax cut for an overwhelming majority of Maine households.
Supporters note that the reform simplifies the income tax while expanding the sales tax in a revenue-neutral fashion to services that should not justifiably be exempt. Opponents criticize the new tax on services or expanded taxes on out-of-staters, or argue it doesn’t go far enough.
The Maine legislature should remain focused on creating a tax code that pushes for simplicity, neutrality and stability. Whether this marks the beginning of larger tide of beneficial tax reform or the high watermark is yet to be seen.
Check our blog for commentary tomorrow on the election results!
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