Drive by the city of Portland and the skyline could give you the impression that the local economy is booming. But like most of the things you can see through a car window at highway speed, the truth is more complicated.
It’s true that Portland is not suffering the same kind of economic decline that has gripped other parts of Maine, but the city has pockets of deep poverty and unique demands to provide regional services that end up on the local taxpayers’ tab.
Even though there are obvious differences between cities and towns, the state keeps acting as if every municipality is the same. Augusta has a monopoly on broad-based income and sales tax collection, forcing local governments to rely on property tax alone. Since the financial crash of 2007, the state has been loath to meet its obligations to localities, especially after it cut income tax rates to help the highest earners.
It’s time that Maine recognize that different communities have different needs and join the vast majority of states that permit municipal governments to impose a local-option sales tax.
Portland, Maine’s biggest city, also has the most poor people. The poverty rate of 18.7 percent is well over the state’s 11 percent rate. More than half of the children in Portland’s public schools come from families with incomes low enough to qualify for subsidized meals (also above the state average), which means that many of those students will need educational support services that children from better-off families do not.
Every night, hundreds of Mainers line up for emergency shelter in Portland because they are homeless. Many more are struggling to stay housed in a tight real estate market, a rent hike away from the streets. Even the new buildings in the city’s skyline requires a critical eye, especially when you consider that some of the biggest projects are hospitals, which bring people to the city but don’t show up on the tax rolls.
A service center community is a regional hub, but local taxpayers pay almost all the bills. The U.S. Census says that 77,000 people live in Portland, but the daytime population is closer to 96,000 when you count the people who come to the city for work or play. That includes 5.3 million visits a year from tourists, who don’t pay local taxes but do contribute to the need for police, fire and emergency services.
Based on census data, a 1 percent increase in the sales tax would raise $17 million for the city, roughly what it now gets from the state for education. A 1 percent increase in the meals and lodging tax on the local level would raise about $5 million. Either way, much of that money would leave the state in tourists’ pockets if these taxes were not collected.
The arguments against a local-option tax tend to focus on what it won’t do. It’s true that allowing municipalities to levy a sales tax won’t raise revenues for municipalities that don’t have retail or hospitality businesses. And it won’t bring good jobs to rural areas, or diminish income inequality. But not every policy can fix every problem.
Restoring state revenue sharing to pre-LePage levels and finally fully funding education at the statutorily mandated 55 percent would benefit many communities. But even then, the service centers would still have obligations that outlying communities do not.
A local-option sales tax would give communities that host regional services a way to pay for them without hurting other municipalities. It’s time they were given the option.
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