AUGUSTA — Cities and towns are unlikely to get the authority to collect local sales taxes in 2019 because a bill before the Legislature was rejected by a key committee Tuesday.
In a 5-7 vote, Democrats joined Republicans on the Legislature’s Taxation Committee in rejecting the measure, which would have allowed municipalities to add up to a 1 percent sales tax on some goods and services.
While the bill, L.D. 1254, gained the broad support of a coalition of mayors this year, the state’s business community has staunchly opposed the idea. Under the legislation, local voters would have to first approve the tax during a referendum. The bill also would have allowed cities to apply the tax only during the busy summer tourism season.
Mayors of Maine’s largest cities have said the tax is necessary to help relieve increasing property taxes and to offset losses in state revenue sharing that have steadily built up over the years.
Portland Mayor Ethan Strimling told the committee his city had lost more than $33 million in state revenue sharing over the last five years.
Strimling, a Democrat, and Auburn Mayor Jason Levesque, a Republican, joined forces with other Maine mayors asking lawmakers to support the change in March.
Strimling said allowing cities and towns to decide if they want to tack up to an additional 1 percent on the sales of goods and services was one way to give cities a revenue source beyond the property tax.
He said a 1 percent tax in Portland would be worth about $16 million a year for the city’s $360 million annual budget.
The bill, which has long been a goal of the Maine Municipal Association, an association of nearly 500 cities and towns, comes before the Legislature nearly every session.
Maine is among the 12 states that do not allow local sales taxes, according to the Tax Foundation, a nonprofit Washington, D.C.-based tax policy think tank. Maine’s statewide general sales tax of 5.5 percent is also the fifth lowest sales tax rate in the United States, according to a 2017 Tax Foundation report.
The measure will next face additional votes in the House and Senate, but its battle will be uphill without the unanimous support of the Taxation Committee.
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