State taxes could go up

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Some legislators are talking about taxes as part of a solution to the state’s budget deficit now that the governor’s plan to sell off proceeds from the lottery has been attacked by members of his own party.

Based on compromises being floated in the halls of the Statehouse, few would rely on tax increases alone to fill the hole that would be left without Gov. John Baldacci’s plan to sell $400 million in lottery revenue for $250 million in upfront cash.

Rather it would be a combination of tax and fee increases, budget cuts and perhaps selling a smaller chunk of the lottery than originally proposed. The governor’s plan calls for selling $40 million in annual revenue for 10 years.

“I can see a scenario that includes a small tax increase that is reasonable,” said Sen. Richard Nass, R-York, the Republican’s Senate representative on the Appropriation’s Committee. “I’m uncomfortable raising taxes, but I know it might have to be done.”

The key for Nass, who in the last session served on the Taxation Committee, will be if a tax increase is coupled with significant budget cuts.

“How far are they willing to go to cut programs?” he asked of the Democrats. “How small is the tax increase as opposed to the cuts?”

For his part, the governor continues to push ahead with the lottery sale. His finance department has put out a request for bids to financial firms to help structure the $250 million deal.

The Appropriations Committee has the task of coming up with a budget proposal that would be palatable to the Legislature. While it is hoping to get two-thirds support from both houses, even a majority seems in doubt in the Senate right now, with two Democrats on the record as opposed to the governor’s lottery sale. The split in the Senate is 19 Democrats to 16 Republicans, and the Republicans have come out as a group in opposition to the lottery sale.

Democrat split

Sen. Ethan Strimling, D-Portland, led the charge earlier this month, and last week the Labor Committee, of which he is the Senate chairman, voted against the plan. Then a majority of the Legal and Veterans’ Affairs Committee voted against it.

Strimling would like to reduce the Business Equipment Tax Reimbursement (BETR) program – worth more than $75 million annually – and bring back the snack tax to help pay the bills.

Sen. John Nutting, D-Androscoggin, also joined the chorus. He is considered a renegade among his party and opposed the school funding formula in the governor’s tax reform bill. Nutting has been calling for an expansion of the sales tax to recreation, saying rich people get to moor their boats tax-free while the state is cutting health programs for kids.

Sen. Philip Bartlett, D-Gorham, who is on the Labor Committee, said he wasn’t at the work session when the committee came out against the lottery sale, but, “I’m supporting their vote” because it started the discussion.

“I’m hesitant to draw really sharp lines this early,” he said about completely ruling out the lottery sale. “We have to look at what cuts would be required,” and perhaps look at sin taxes, like raising the tax on alcohol. That would be palatable if the taxes were used “to help the human service programs,” for drug and alcohol addiction, he said.

“Some have said they won’t vote for the budget if the lottery sale’s in there. I’m not ready to make that statement yet,” Bartlett said, but he’s open to alternative solutions.

Sen. Dennis Damon, D-Hancock, said he was looking at all aspects of the budget, including the lottery sale, and “some areas are giving me pause, giving me concern.”

As for whether he would vote to raise taxes if the lottery sale were eliminated or scaled back, he said he had supported raising the sales tax to pay for property tax relief in the past, but “presently it’s not high on my list.”

Sen. Arthur Mayo, D-Sagadahoc, said he doesn’t see where the money would come from if the lottery sale was voted down. “If not that where do we find $250 million to balance the budget?” he asked. Speaking from his position as co-chairman of the Health and Human Services Committee, he said, “We’re already trying to find $140 million in HHS cuts.”

Sen. Bill Diamond, D-Cumberland, said he doesn’t like the lottery sale, but doesn’t see an alternative yet.

“I’m not enamored by the proposal, by any means,” Diamond said, but “I’m not going to be voting to raise taxes.”

Cuts to consider

“The real work on the lottery isn’t going to come until we try to fill the hole,” said Sen. Nass, who feels he has to try and negotiate a compromise between tax increases and budget cuts, as the Republican senator on Appropriations. “That’s my job.”

The cuts, he said, are there to be made, if Democrats are willing.

The most straightforward thing to do would be to eliminate vacant positions, he said.

“Every time we’ve looked at it in my years here, there’s between 200 to 600 vacancies,” he said, and the target can be established by determining how much you need to cut in dollars and “dividing by $50,000.”

Nass said people like Strimling may need to “gulp” and accept budget cuts, and Republicans may need to do the same and accept some taxes, if they want a compromise.

Sen. Carol Weston, R-Waldo, said tax increases aren’t an option for her.

“I would not support a tax increase,” she said. “How can we talk about historic tax relief in the budget, and then have a tax increase?”

She said it was the governor’s responsibility “to bring us a well put together budget, that’s prudent and responsible,” and that doesn’t include selling off $40 million in lottery revenue for the next 10 years.

Rep. Darlene Curley, R-Scarborough, who sits on the Appropriations Committee, isn’t willing to talk about raising taxes either. “Right now, it’s totally off the table to me personally.”

Instead Curley would like to see a review of all government spending on services and programs “to see if we must do it or whether it would be nice to do.” If it’s not essential, she said, it has to go.

Rep. Stephen Bowen, R-Rockport, is another member of the Appropriations Committee who thinks legislators are focusing on the wrong thing. “The mentality is if we can just hold out for a couple more years, the money will start pouring in the windows.” That’s not going to happen, he said.

“I have to be convinced we’ve exhausted all our alternatives” in terms of cutting spending, he said. “How much more taxation can the economy sustain?”

Bowen pointed to a line in the budget showing legislative staff has grown from 79 to 143 in the last 10 years, and the budget for that staff has increased from $13 million to $22 million.

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