Gov. Paul LePage briefs the press on his two-year budget proposal.
Raise your hand if you ever thought Gov. Paul LePage would propose raising the sales tax.
Anyone?
No. Me either. But there it was, smack dab in the middle of a $6.2 billion budget bill that pairs a massive tax code overhaul with many other significant policy initiatives deserving of examination. But for now, wow, where to begin?
How about by describing the scene at the State House after the procession of private briefings to lawmakers. At one point House minority leader Rep. Kenneth Fredette, R-Newport, emerged from the governor’s cabinet room and unwittingly stumbled into a gaggle of anxious reporters.
What’s in it? Fredette looked up, seemingly stunned by what he’d just heard during the briefing. He searched for answers, and then, an escape.
“Um, stuff,” he replied. He suddenly realized that he and other leaders had been instructed to leave the cabinet room through the private elevator entrance. He excused himself and darted to safety.
We wrote Friday that the governor’s budget would likely generate opposition from Democrats while also putting Republicans in a pickle. We may have overstated the former and understated the latter. Republican leaders all said Friday that the proposal was bold. What else did they say? Not much. It’s dangerous to draw too many conclusions from observations, but the scene at the State House after the proposal was unveiled was a mix of bewilderment and awe, particularly among Republicans.
The budget was a bombshell. And from a governor with a knack for delivering his fair share of bombshells, policy proposals or otherwise.
Republicans have always been up-front about wanting to the cut the state income tax, but raise the sales tax? Um, no. In fact, some of the Republicans sitting in the House and Senate were supported by campaigns in 2010, 2012 and 2014 that slammed their opponents for backing a 2009 tax reform bill that voters repealed.
Here’s the “baby tax” ad from 2010:
LePage’s supporters are quick to point out that the governor’s budget is different than the 2009 reform bill that Democrats pushed through. Of course it is. For starters, this is a budget, not a standalone tax bill. It’s also a more comprehensive overhaul than the 2009 reform effort. However, the concept, the mechanism, is similar.
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So what’s next? Watch the line of enemies of this thing form? Maybe. There’s still a lot more to scrutinize in the proposal. There will be opposition, starting, perhaps, with the large nonprofits who could be suddenly be paying property taxes to help offset the elimination of municipal revenue sharing. That means hospitals, the same hospitals that LePage made whole in 2013 with his oft-championed Medicaid debt repayment bill. Interestingly, the budget also proposes to raise Medicare reimbursement rates, something from which hospitals could benefit.
The proposal to broaden municipal authority to assess fees or taxes on large nonprofits has been attempted before. In fact, LePage inserted a similar measure in his 2013 budget plan. The result was a study commission and a little-read report that you can read here (Check out the sign-out sheet in the Law Library). The report describes a central tension in the property tax debate: “the desire to value and support the vital public role served by the various non-governmental service organizations versus the strain on municipalities and other taxpayers that have high levels of tax exempt property.”
If a tax on nonprofits survive the budget process, the tension will shift from the State House to cities and towns where the organizations are located. It’s hard, if not impossible, to generalize about the relationships between municipalities and large nonprofits. But it’s easy to envision some difficult decisions that balance local officials’ need to hold the line on property taxes while showing support for a large employer.
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There’s already a little confusion about the budget proposal provision to eliminate sales tax exemptions. Take the initiative that eliminates the exemption on snacks, such as candy and prepared foods. Wait, doesn’t Maine already tax snacks? Yes and no.
The Legislature repealed the state’s so-called snack tax in 2001, apparently because it was too confusing. It’s still confusing. As the Sun Journal reported in 2012, distinguishing between groceries and snacks is not easy. Sometimes retailers tax things they shouldn’t, or vice versa. From the SJ piece:
“The Sun Journal recently shopped at 10 area food sellers, including convenience stores, grocery stores, a pizza joint and a farm stand, purchasing one or two food items at each place. Most places charged correctly. But two of the 10 — 20 percent of those surveyed — charged tax on items that should have been tax-free.
One was the Lewiston House of Pizza, which charged 7 percent tax on a family-sized bag of potato chips. Although the pizza place must, and did, charge 7 percent tax on bags of chips less than 6 ounces (what the state calls a single serving), Maine rules consider large bags to be a “bulk grocery staple” and thus tax free.”
Hopefully lawmakers will clarify this kind of issue if they go along with LePage’s proposal to eliminate all the exemptions.
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Anyone notice that the Tax Foundation had a detailed analysis of the governor’s tax package within minutes of the proposal going public?
According to David Heidrich, a spokesman for LePage’s budget office, the administration gave the nonprofit a sneak peek of the proposal four days before it was released.
“We provided the Tax Foundation an outline of the governor’s proposal on Monday afternoon,” Heidrich said in an email. “By that time the tax reform package was complete and couldn’t be changed. We simply asked the Tax Foundation to review the proposal so they could provide an independent, non-partisan analysis of it.”
The Tax Foundation says on its website that it works to educate policymakers and the media on tax reform. According to its 2013 IRS filing, it does not engage in lobbying or employ lobbyists.
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Rep. Elizabeth Dickerson, D-Rockland, says she’s resigning to move to Colorado. The move comes at bad time for Democrats, who will have to spend money to defend the seat in a special election.
Whether a Democrat wins Dickerson’s post won’t affect the overall balance of power in the Democrat-controlled House. Democrats lead Republicans with 79 seats compared to 68 Republican seats. There are four independents who also tend to vote with Democrats. However, a Republican victory in District 93 could be problematic if House Speaker Mark Eves, D-North Berwick, has any difficulty unifying his caucus between 2015 and 2016.
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