Maine’s Not-So-Beautiful Sunset
June 28, 2013
Maine’s legislature passed its two-year budget earlier this month, and it includes two allegedly temporary tax increases—one in the state sales tax (from 5 to 5.5 percent) and another in the leisure tax (from 7 to 8 percent; levied on lodging, bars, and restaurants) as a way to close the state’s $880 million budget gap. Maine’s governor, Paul LePage, vetoed the budget on Monday because of the tax increases and an $18 million cut to proposed education spending. Legislators quickly overrode that veto on Wednesday. The tax hike is set to expire in June 2015.
That June 2015 date is something we refer to as a “sunset clause.” A sunset clause provides that a law, in all or in part, will terminate unless lawmakers explicitly extend the deadline. In theory, this is good because it forces lawmakers to re-evaluate legislation over time. Unfortunately, this isn’t how they actually function. Sunset clauses often show up in the tax code to make a tax increase “temporary.” Those tax increases rarely end up being temporary. Time and time again we’ve seen allegedly temporary changes don't always expire as promised when legislators face a revenue shortfall or political pressure (examples include Arizona, Delaware, Minnesota, and North Carolina).
We’ve got two problems at play here. First, temporary tax changes are poor policy because they make it hard for taxpayers to effectively budget for future years since they don’t know if and when tax laws may change again. Though stability is something the tax code should embody, these temporary-to-permanent changes aren’t the kind of permanence for which we strive. Tax policy changes should be well thought-out before being enacted; they shouldn’t be a year-to-year strategy to close a budget gap.
Second, sunset clauses rarely function as a way to re-evaluate existing laws. The Washington Post amusingly and accurately dubbed them “democracy’s snooze button.” Even though they were originally meant to act as “expiration dates forcing [lawmakers] to reconsider old laws,” they’re often just extended without much consideration. Politicians shouldn’t dub tax increases as “temporary” as a way to sell them to the public if they were never intended to be temporary in the first place.
More on Maine here.
Follow Liz on Twitter: @elizabeth_malm.
Was this page helpful to you?
The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work?Contribute to the Tax Foundation
Let us know how we can better serve you!
We work hard to make our analysis as useful as possible. Would you consider telling us more about how we can do better?Give Us Feedback