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May 05, 2009

Maine Will Tax Anything

Even water.

The tax is the most problematic of the proposals before the Legislature, said Mark Dubois, natural resource manager for Poland Spring. He said the tax would cost the company $7 million annually, or 20 percent of its annual payroll.

"It simply puts Maine jobs at risk," Dubois said.

Poland Spring, a subsidiary of Nestle Waters North America, is the third-leading brand of bottled water in the country, behind PepsiCo's Aquafina and Coca-Cola's Dasani. The company employs 800 people in Maine.

The bill's sponsor, Rep. Jon Hinck, said the tax is "absolutely not" meant as a disincentive to bottle water in Maine. He said he did not want to revisit an earlier 20-cent tax because he thought it was too high.

"We don't want to hurt the golden goose. We don't want to hurt the company competitively," said Hinck, D-Portland.

It's funny that Rep. Hinck should bring up the story of the golden goose, since he and the seven other members of the legislature who sponsored this thing are the ones ready to slice the gold-providing bird up. Do these folks really understand what taxation does? Tax water, and that's $7 million less Poland Spring can use to hire workers, give to the community or invest back into infrastructure.

The legislature knows they've got the company over a barrel. Poland Spring's brand largely depends on its location - the pristine woods of Maine and the town of Poland Spring, so it's not as though the company can move out of state. So why not pick on them, right? They're a perfect target.

Needless to say, I hope the bill fails. It's hard enough for companies to do business in this state. The legislature shouldn't be looking for ways to make it harder. Still, it's nice to know that something I wrote in 2005 is still relevant:

Last month, the Tax Foundation determined that Maine taxes its residents at a higher rate than any other state in the country. Last year, Mainers sent 13 percent of their income to Augusta. As a point of comparison, God only asks for 10.

Upon absorbing the extent of this ‘honor,’ one would hope our elected representatives realize the error of their ways, don sackcloth and ashes for a week, and then sit down together to make hard decisions about how to decrease the state’s ever-increasing appetite for the people’s money. I suspect we’ll see porcine aviation first.

Instead, a group of legislators, led by Representative Leila Percy (D-Phippsburg), sponsored LD 1437 - "An Act To Broaden the Sales Tax Base and Lower the Sales and Use Tax and Service Provider Tax Rates.” The bill lowers the tax rate on services provided in the state from 5% to 2%. Some might be thinking…well, that sounds like a tax cut. Technically, it is a cut in rates, but someone should tell Representative Percy that lowering the tax rate does little overall good when you decide to tax pretty much everything in sight.

Which is basically what this bill does.

The bill’s text spends a good deal of time defining terms such as “Social and organization services,” “Financial services” and “Apparel services,” right before imposing a brand new 2% tax on them. Here is a (very) short list of the things the legislature wants to tax:

Theater and opera performances, movies, sporting events, dry cleaning, tax preparation services (can't say these jokers don't have a sense of irony), physician service, nursing home service, newspapers, veterinary services, advertising, courier service, nursery schools, dental care, health clubs, environmental consulting, professional association memberships, fraternal association memberships, waste management, legal services, motor vehicle insurance (which, of course, we’re required to have) and medical care and hospitalization insurance.

Noting that LD 1437 would tax only “pretty much everything in sight,” Representative Richard Woodbury (U-Yarmouth) and Senator Joseph Perry (D-Penobscot) sponsored LD 1595 – “Oops, We Forgot a Few Things.” Sorry, that’s not the real name. The bill is euphemistically titled “An Act to Rebalance Maine’s Tax Code.” Only in Augusta could legislators think that the tax code is terribly out of balance if someone doesn’t pay tax when they attend a fair in the summer or engage the services of a locksmith after leaving their keys in the car. (Both would be taxed if this bill is passed)

Consider how much of your daily routine is already subject to tax.

When you get up in the morning, you pay tax on the oil used to heat your shower water and the electricity used to make your first cup of coffee. You pay tax on the vehicle you use to get to work and on the gas used to power it. The piece of paper you use to write a memo? The land where the trees are grown for paper was taxed. The mill was taxed. The purchase of the paper was taxed. The hamburger you ate at lunch? Taxed. When you get home and have a glass of wine or a beer to relax? Taxed, big time.

It’s obvious that Maine’s legislators are addicted to tax revenue. Normally a twelve-step program is needed to rid people of their addictions. In this case, a two-step program will do.

Step one – call your legislator and tell them to vote against these bills and find a way to cut state spending.

Step two – if your legislator doesn’t listen, vote for his or her opponent in the next election.

Most people elected to state office like being in the legislature. Otherwise, they wouldn’t have gone through the trouble of running for office. Present them with the possibility of losing their power, and most of them will take the time to listen to what people are saying. So if enough Maine residents communicate their displeasure with the growing tax burden and the increasing size of the state government, there’s a possibility things will change.

Maine is in a cycle of taxing and spending, because I think it’s the easiest thing for legislators to do. Consider what happens when cuts in programs are proposed – protests, angry people showing up at normally boring committee hearings. Over the years, the budget has gone up seemingly because legislators just don’t want to put up with the trouble that comes along with reigning in state spending.

If Mainers are fed up with taxes, they should keep in mind that we voters have the power to replace every single member of the House of Representatives next year. If those we elect to make hard decisions keep taking the easy road, it’s time to consider doing just that.

Posted by slublog at May 5, 2009 09:36 PM

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