June 06, 2020

King requests court view on sales tax cut > Rival Connolly chides governor for passing off tough decision

AUGUSTA — The question of whether Maine taxpayers will see a half-percent drop in the sales tax this year has been passed to the state supreme court as the result of action taken Thursday by Gov. Angus S. King.

The state’s independent governor, who is seeking re-election this fall, maintains that the 1993 legislation requires the sales tax to be decreased from 6 percent to 5.5 percent effective Oct. 1. But King also insisted that the mechanics of the reduction process as specified in the law are unusually “ambiguous” and “imperfect,” and required an opinion from the court.

King’s Democratic opponent, Thomas Connolly of Scarborough, said the governor’s effort to involve the Maine Supreme Judicial Court in the sales tax rollback was a weak attempt to pass the buck on a decision King should have been able to make himself.

“He has to take the bull by the horns instead of deferring the question,” Connolly said. “He can’t send it off. The function of the governor is to make tough decisions and the fact that he thinks he sees some ambiguity doesn’t excuse him from doing his job. I would never pass the buck to the Law Court. I’ve been kicked by them 50 times. Why would I ask them? They might decide against my reading of the law.”

Passed by the 116th Legislature to weaken the sting of the so-called “temporary” sales tax increase from 5 percent to 6 percent in the wake of the 1991 budget crisis, the law maintains that any time state general fund revenues exceed 8 percent from one fiscal year to the next, the sales tax must be decreased by a half-percent.

But King pointed out that the law also seems to require that before the decrease can be implemented, the state budget officer is supposed to determine that the 8 percent threshold will be reached by an estimate of general fund revenues on or before May 15 of the current fiscal year.

“Based upon information [received on March 16 of the current fiscal year that ended June 30], and taking into consideration an estimate of the Revenue Forecasting Committee … the budget officer concluded that general fund revenues were not likely to exceed those of the prior fiscal year [FY 1997] by 8 percent or more … The economic trigger was not activated in the current situation,” King wrote in his six-page letter to the court.

Additionally, the 1993 law directs the state controller to determine whether the 8 percent benchmark has been reached at the close of the fiscal year. Concerned that all of the mechanisms guiding the legislation had not been met, King said the law’s failure to anticipate the budget officer’s inability to predict the benchmark could have an impact on the statute’s intent.

King said he was also troubled by a phrase in the law regarding general fund revenues for any fiscal year, as determined by the state controller, “at the close of the fiscal year following the end of that fiscal year … .” The language, he said, seemed to imply two interpretations: one that would result in a rollback of the tax effective Oct. 1, 1998, with limited reserves collected in July, August and September, or another which would implement the cut on Oct. 1, 1999, with reserves equaling or exceeding the lost half-percent sales tax revenue.

While the latter interpretation would leave the state in a better position to prepare for the $60 million-per-year loss of revenue to the general fund, King agrees with many Republican lawmakers who insist the Legislature’s intent was for the tax cut to take place as soon as possible.

Still, the governor is confused by what he described as the law’s “rather elaborate two-track schedule” as detailed by the charges to the state budget officer and the state controller.”

“There are several different triggers in this law,” King told reporters Thursday. “It’s basically a question of a three-month reserve or a 15-month reserve.”

In that regard, King has asked the court a single question: “Does [the statute] require the sales tax rate imposed by [the rollback law] be reduced on Oct. 1, 1998, from 6 percent to 5.5 percent … where the state budget officer did not estimate on or before May 15 that general fund revenues would exceed the 8 percent benchmark referenced in [the statute], but the state controller does determine at the close of the FY 1998 books that actual revenues exceeded the 8 percent benchmark?”

King expects the court to render an opinion on his question in time to notify about 60,000 Maine vendors of the impending tax decrease by Aug. 15 in order to implement the tax change by Oct. 1.

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