Higher Sales Tax Hurts Maine’s Poor

The Left in Maine take pride in their self-proclaimed “caring for the poor.” However, rhetoric aside, their actions speak louder than their words.

Earlier this year, the Democratically-controlled legislature enacted a budget, over Governor LePage’s veto, that raised the sales tax by 10 percent (to 5.5 percent from 5 percent) and the meals and lodging tax by 14 percent (to 8 percent from 7 percent) and became effective 14 days ago on October 1. Over the next two years the higher sales tax will cost Mainers (pdf) over $134 million, and the higher meals and lodging tax will cost another $48 million.

In a great display of irony, the higher sales tax will hit the poor the hardest. Chart 1, created from an analysis from the union-backed Institute on Taxation and Economic Policy (pdf), shows that the lowest 20 percent of taxpayers pay the most in sales and excise taxes as a percent of income. Since Maine’s sales tax also applies to cigarettes, the higher sales tax also acts like an excise tax increase creating a double-whammy for Maine’s poor.

Additionally, the higher sales tax will drive more Mainers across the border to shop in New Hampshire, especially poor Mainers who are bearing the brunt of the tax hike. I have estimated that Maine already loses close to $2 billion per year in retail and wholesale sales. Had this money stayed in Maine, that would have meant more business for local mom-and-pop retailers, more jobs for the unemployed, and less dependency on welfare.

Chart Showing Sales and Excise Taxes Hit Maine's Poor the Hardest