Testimony at Hearing on LD 1227, An Act to Promote Tourism and Economic Development

We have a dilemma in Maine. We want good schools, good roads, safe communities, and opportunities to achieve a better life. Unfortunately, our current tax system is not generating the revenue needed to sustain public investments that will result in safe and vibrant communities and a strong economy.  Adjusted for inflation, General Fund revenue in the FY 2014-2015 biennium is forecast to be lower than in any two-year budget period since the end of FY 1997 and a billion dollars below what it was in the FY 2006-2007 biennium. That’s a billion dollars we don’t have to make needed investments in our people, our schools, and our communities.

We’ve tried to compensate for recent revenue shortfalls by cutting spending. After five years of cuts, we’ve passed beyond a point that is healthy for Maine’s people and economy. We must make new revenue part of the solution. The Governor’s budget proposal confirms this by raising income and property taxes on hardworking Maine families who can least afford to see their taxes go up.

At the Maine Center for Economic Policy, we believe there is a better solution that we can achieve by adhering to the following objectives:

• protect low- and middle-income people from property tax increases.
• make sure Maine’s wealthiest residents pay their fair share.
• export more of the costs for providing services and maintaining infrastructure to nonresident property owners and tourists.
• increase accountability for taxpayer subsidies to large corporations and get rid of costly tax breaks and subsidies that don’t help Maine’s economy and disadvantage our locally owned businesses.

LD 1227 provides a framework for advancing the objective of making sure out-of-state visitors pay their fair share. Maine is a “cheap date” for out-of-state visitors. Maine’s lodging tax is low compared to our neighbors, and Maine struggles to pay for the roads, public safety, and other services that visitors depend on. Asking out-of-state visitors and seasonal residents to pay their fair share for these public services is better for the economy than raising property taxes on poor and middle-class families.

While LD 1227 provides a framework, MECEP encourages the legislature to direct the revenues it generates to the General Fund and not tie these funds to a specific budget item. This is the most effective way to ensure that resources are available and allocated in a way that addresses priority concerns. Furthermore, we all benefit – businesses, residents, and nonresidents alike – from public investments in our communities and infrastructure. MECEP acknowledges that we should look at potential disparities in the treatment of service center communities under current law and that Maine should have a well-funded tourism marketing program. Still, it is better tax policy to have revenues collected and distributed at the state level. 

MECEP also recommends that the committee consider including meals as well as lodging in this proposal. In both cases, additional information from Maine Revenue Services would help determine revenue and distributional impacts.

Clearly, we cannot overcome the budget dilemma Maine faces without new revenue. MECEP believes that LD 1227 could be part of a broader approach that staves off property tax increases contained in the Governor’s budget proposal and is better for Maine’s people and economy.

Thank you for your time and for your service to the State of Maine.

Garrett Martin, Executive Director of the Maine Center for Economic Policy testifying before the Joint Committee on Taxation in favor of LD 1227, An Act to Promote Tourism and Economic Development.