TAX NEWS - JUNE 2010

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Maine Tax: Maine residents vote on whether to keep or overturn state's new tax reform law

Tax weary Mainers had a choice Tuesday whether to retain or reject a new tax reform law that lowers the state's income tax rates while placing new taxes on dozens of purchases ranging from car repairs and amusement park admissions to movie tickets and dry cleaning.

The law, which was passed by lawmakers last year but has not gone into effect, lowers Maine's top income tax rate from 8.5 percent to 6.5 percent. To make up the difference, the law broadens the existing 5 percent sales tax to a laundry list of items that are now exempt. It also hikes the food and lodging tax, from 7 to 8.5 percent.

Question 1 on Tuesday's ballot asked Mainers if they wanted to do away with the law.

Supporters of the law say nearly 90 percent of Mainers will see their combined income and sales tax payments drop because out-of-state visitors will pay more of the sales taxes. But opponents say it amounts to new taxes on everyday purchases that will be felt by every Mainer.

In Portland on Tuesday, Toby Hollander said he trusts that lawmakers chose the best option in passing the tax overhaul.

"I think the general idea of spreading out the sales tax so that we're not totally dependent just on things that are subject to the recession is a good idea. We've been going through this for years and years and years. This is something that needed to be done a long time ago," said Hollander, who is a guardian for children in the court system.

Linda Cooledge, a lifelong Portland resident who said she's considering moving to Florida because of Maine's high tax burden, voted against the tax law because she didn't want to see taxes expanded to new goods and services.

"Once they've got their hands in our pocket for these little taxes on everything, now they've got the go-ahead to add to it every year. Once the government and the state of Maine has their hand in your pocket, they keep dipping further and further," she said.

The tax overhaul bill has been called the most significant change in Maine's tax code since the personal income tax was adopted in 1969.

The law, described as the most sweeping change in Maine's tax code since income taxes were adopted in 1969, is designed to be revenue-neutral, but Maine Revenue Services projected it would result in tax savings of $54.3 million for Mainers in 2011 because out-of-state visitors would pay more in restaurants, lodging and car rental taxes.

If the law is retained, the average Maine family in 2011 would pay less in income taxes but more in sales taxes - for a combined savings of $77, the agency said.

Soon after the law was passed, a coalition to repeal the tax law collected more than 60,000 signatures to force a statewide vote.

Maine's business community split over the measure. The Maine State Chamber of Commerce and the Portland Regional Chamber supported keeping the law, but the Maine Merchants Association, the Maine Restaurant Association and other business organizations opposed it.
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