Statehouse Report: Bills would enable local-option lodging tax

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A local-option sales tax on meals and lodging has long been a legislative priority for Portland and other communities that, in their view, must provide public services for visitors that are not reflected in other forms of state aid.

Over the past decade, more than 20 bills have been proposed to provide some form of local option, yet to date, none have become law.

Two legislators are still trying to change that, and their bills were carried over to this year.

Local option taxes are routine in states outside of New England, where there are robust governments at the municipal, county and state levels. Sales and income taxes are often divvied up among the three levels, with each getting a designated share.

State Rep. Maureen Terry, D-Gorham, says a lodging tax makes sense “because it’s discretionary spending that’s largely done by out-of-state visitors.”

But Maine, like other New England states, has anemic county governments that perform few functions, mostly probate courts, jails and rural policing. State aid is distributed directly to municipalities, while the county government is supported largely by property taxes.

Lately, there have been more determined efforts to diversify the municipal tax base, both to strengthen local budgets and relieve the burden on property taxpayers. The latest proposals still alive are LD 1254, from Rep. Michael Sylvester, D-Portland, and LD 609, from Rep. Maureen Terry, D-Gorham.

Both bills would provide a 1 percent lodging tax on top of the 9 percent the state now charges, but they differ in how they would raise revenue.

Terry’s bill is actually not a local option. Instead, the state would collect an additional 1 percent, but distribute it directly to municipalities where it is raised. Portland’s share could be about $2 million – a small but significant portion of a municipal budget of more than $250 million.

In Gorham, where Terry counts just one bed-and-breakfast business, she said it would bring in “about $600.” But that’s OK; the intent is to repay service centers for their substantial investments in roads, policing, and emergency services.

The lodging tax is a logical source, Terry said, “because it’s discretionary spending that’s largely done by out-of-state visitors.” It’s a strategy used heavily by Florida, where combined rates in tourist-destination counties reach 13 percent.

Terry also said that adding 1 percent to the state levy is much simpler, administratively, than local option taxes, which require a new accounting system. “The state would just add it to the revenue sharing checks it already issues,” she said.

Rep. Michael Sylvester, D-Portland, who has proposed a traditional local-option tax, acknowledges “it usually comes down to the urban communities that would benefit versus the rural communities that feel left out.”

Sylvester’s bill is the traditional local option: 1 percent for each municipality that approves such a tax. He acknowledged that local-option bills have faced tough sledding, because “it usually comes down to the urban communities that would benefit versus the rural communities that feel left out.”

Despite that conflict, LD 1254 passed the House last year, 73-70, before failing in the Senate; it was re-committed to the Taxation Committee for another try. Terry’s bill, LD 609, has yet to face a floor vote.

Sylvester thinks a new amendment may increase his bill’s viability. Municipalities would receive 75 percent of the proceeds, with 25 percent going to the Rural Development Fund, an underfunded program that benefits rural infrastructure; LD 1254 could increase its revenues tenfold, Sylvester said.

It also has one advantage Terry’s bill doesn’t: Because it increases only local taxes, it wouldn’t run afoul of Gov. Janet Mills’ campaign pledge not to allow state tax increases in her first biennial budget.

The administration hasn’t commented on either bill.

Both bills received 8-5 party-line votes in the Taxation Committee, with Democrats in the majority. They could face floor votes as early as this week, but that decision is in the hands of House leadership.

“They’re both good bills,” Sylvester said. “The question is which one the Legislature will advance.”

Douglas Rooks has covered Maine issues for 35 years as a reporter, editorial writer, columnist and former editor of Maine Times.