March 29, 2024
BANGOR DAILY NEWS (BANGOR, MAINE

Swiss cheese and sales-tax exemptions

Few of us are comfortable with being taxed, but nothing is more oppressive than a tax badly imposed. This is especially true when the original intent of the tax becomes shredded by direct benefits for those with enough political influence and insider knowledge to turn the laws to their personal advantage. I am, of course, referring to the numerous exemptions that have been seasonally placed upon the Maine sales tax.

The majority of people in Maine pay a dear cost for the tax benefits that have been legislated for the few. Our tax revenues are not sufficient to fund basic services, our supports for education have been reduced, our safety net for the underprivileged and disadvantaged has been stretched too thin, our health care facilities are being dismantled, our legal system is overloaded, and our economy is, to put it euphemistically, “flat.” Meanwhile, special interests of varying importance to the general welfare feast at public expense. To be more concrete, in 1951 when the sales tax was invocated, there were six tax exemptions, mostly related to life and medical concerns. In 1992 there are 106 exemptions representing an annual tax expenditure of more than $600 million.

There are a wide variety of sales tax exemptions. The accompanying list represents only a sample of the earliest and the more recent exemptions with their FY 93 tax expenditures.

1951 Sales of publications (like the Bangor Daily News) 1951 Sales of certain returnable containers 1951 Motor vehicle fuel 1965 Telephone and telegraph services 1981 Coil-operated vending machines 1985 Railroad track material 1987 Construction contracts 1989 Sales of packaging materials 1989 Sales of machinery and equipment 1989 Depeciable machinery 1989 Non-profit youth and scouting 1989 Distributors of video tapes

To be sure, every interest, Girl Scouts, churches, veterans, educational institutions, snowmobile clubs and others, can make a case for a tax exemption. (If we hold our present course almost every special interest will have one or more!) At some point this tax will become so cluttered with exemptions that it would have to be abandoned for a value-added tax thereby providing some breathing room before special interests fashion the new tax into Swiss cheese. Who doubts the power and purpose of the legislative-lobbyist symbiosis that shapes these tax breaks?

What can be done to undo this situation that is so injurious to the public interest? How can we provide for a fair system of taxation and not adversely impact the legitimate needs of our people and our institutions? How can we unwrap the tenacles of special interests from the sales tax? Let me suggest two of the many possibilities:

The Legislature (or the people through referendum) could:

(1) Place a moratorium on all sales-tax exemptions.

(2) Sunset the moratorium after one year (or two years).

(3) Study and evaluate the impact of the moratorium on the present recipients and set in place a new policy.

Or:

(1) Remove all sales-tax exemptions

(2) Write appropriations lines in the regular budget as deemed appropriate.

If one of these proposals were to be given serious consideration, those who are presently recipients of the exemptions

would bewail the dire consequences to the economy, to working people, to the sick and to the needy. They would threaten to relocate to another state. They would warn us that new businesses would not move into Maine. The lobbyists for these interests would wax fat at the trough as they work to prevent any change while hustling financial support to legislators who support the status quo. Nevertheless, the flaws in the present system are obvious to even the least discerning among us, and those in positions of wealth and power know it.

Consider, if you will, the positive impacts of removing sales-tax exemptions. We could reduce the sales tax to 3 percent for everyone — a move that would certainly have a positive impact on the flow of capital and stimulate consumer activity. This would also be of real benefit to businesses and institutions that are not advantaged by an exemption. The other possibility would be to responsibly fund state government services, including the education of our people, health care needs, environmental programs, investment capital for economic growth and development, and the other policies that provide a decent quality of life for people in society.

Ken Hayes is the chairman of Maine Common Cause.


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