December 3, 2013

Maine tax panel gives report lacking details

The task force charged with cutting $40 million in tax breaks ultimately fails to reach a consensus.

By Eric Russell erussell@pressherald.com
Staff Writer

AUGUSTA — A legislative panel charged with trimming or eliminating $40 million in tax incentives finalized its draft recommendations Monday, but members acknowledged that their proposal lacks specifics – a reflection, they say, of the complexities of Maine’s tax system.

The task force, made up of lawmakers, business leaders and tax professionals, was created as a requirement of the 2014-2015 budget that passed in June. Its mission was to find $40 million in savings for 2015 in order to balance that budget. If the money is not found, it would come out of municipal revenue sharing, which would almost certainly lead to higher property taxes.

After several weeks of work, the panel met Monday to present its recommendations, but members ultimately failed to reach a consensus.

Lawmakers on the panel wanted to focus on eliminating specific tax exemptions, even if they weren’t entirely certain of the impact of doing so. Other members wanted to consider additional tax revenue, something that has proven politically tricky in the past, which is why lawmakers are shy to embrace that option.

Sen. Anne Haskell, D-Portland, who co-chairs the panel, repeatedly remarked Monday about how difficult their task was – she called it a “minefield” at one point – but she said the Legislature’s budget-writing committee now has a framework.

“What you’ll see is very similar to what happens with most legislation,” she said.

The Appropriations and Financial Affairs Committee is expected to discuss the task force’s draft recommendations at a Dec. 12 meeting, but a final proposal is likely still months away.

Among the recommendations on the table are:

Capping the historic tax credit, which could save an estimated $2 million.

Capping the Opportunity Maine tax credit, which could save about $1.7 million.

Repealing the retail portion of the Business Equipment Tax Reimbursement, which would achieve $2 million in savings.

Capping the Pine Tree Development Zone credit, which could save more than $3 million.

Some of the bigger-ticket items involve complicated tax policy, such as first-in, first-out accounting, which is used by big companies, and eliminating research and development “super credits.”

Among the revenue options still being considered are:

Applying the sales tax to vending machine purchases, which have been exempt, to create an estimated $1 million in new revenue.

Removing the sales tax exemption for personal care services, such as haircuts.

Removing the sales tax exemption for amusement activities, such as golf and movies.

Applying the sales tax to cable and satellite television, as well as streaming services, such as Netflix.

Rep. Adam Goode, D-Bangor, said now is not the time to add an extra burden on regular Mainers. Instead, he said, the panel should focus on eliminating breaks that benefit corporations.

Sen. Roger Katz, R-Augusta, said any talk of new taxes would be “dead on arrival” in the Legislature if they are not part of a broad tax reform package.

“I wish we could have been more specific with our work,” Katz said. “We’re walking a thin line. We don’t want to make things any more difficult on businesses, but we have the potential consequence of eliminating $40 million in revenue sharing, too.”

However, the committee kept those options because some members thought they should be up for consideration, unpopular though they might be.

Whatever comes out of the budget-writing committee next year could look radically different from what the task force pushed forward.

Looming over the panel’s work has been Maine’s business community, represented Monday by several lobbyists who did not address the committee but listened intently. Many of those business groups are likely to be key players when the final recommendations are approved by the appropriations committee early next year.

Interestingly, the public will never know which groups spent the most time trying to influence the panel. Lobbyists are exempt from the state’s disclosure law in this case because the panel is a task force, not a bona fide committee of lawmakers crafting legislation.

Many committee members admitted Monday that they didn’t have a full grasp of the impact of the various credits and exemptions. Many of the savings and projections were best guesses, Haskell said.

A report due Feb. 1 by the Department of Economic and Community Development could help provide some clarity.

Although the task force failed to come up with a firm list of recommendations, Katz said the biggest long-term benefit could be the creation of a system by which all tax breaks and incentives are evaluated periodically for their efficacy.

That, Katz said, “could be the most important thing this Legislature does.”

Eric Russell can be contacted at 791-6344 or at:

erussell@pressherald.com

Twitter: @PPHEricRussell

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