Local Option Lodging Tax Fails in Maine Legislature
Supporters Say Bill Could Have Potentially Eased Property Tax Burdens
AUGUSTA—A local option lodging tax proposed by Representative Gary Friedmann (D-Bar Harbor) has failed to gather enough legislative support to pass.
The Maine Legislature’s Taxation Committee had voted that the bill, which would have allowed municipalities to add a 2% lodging tax within their own city or town, ought to pass.
However, the bill failed to get approval from the House or Senate last week.
The bill Rep. Friedmann had submitted would have allowed municipalities to add a 2% lodging tax within their own city or town.
“A lot of people left that meeting thinking that it was a way that Bar Harbor could deal with its challenge,” Friedmann said of a 2024 library forum during an early January meeting in Bar Harbor.
That challenge? How property owners in a community of just over 5,000 year-round residents can financially survive despite escalating infrastructure needs, school needs, salary needs, rising property valuations and taxes, as well as increasing water and sewer bills.
In Bar Harbor there is also $100 million in bonds that the town is maintaining and a decrease in cruise ship revenue, occurring with a simultaneous increase in parking revenue.
Rep Friedmann saw the tax as a tool to lower property taxes.
“This bill is property tax relief for service center taxpayers who have been” dealing with increases every year, he’d previously explained.
During public testimony on the proposed tax, Rep. Friedmann stressed that 90% of collected revenues would stay in the cities and towns that the revenues were collected in.
An important element, Rep. Friedmann stressed was communities’ ability to buy into the tax, or not, through a public vote. Bar Harbor could have chosen to participate and Tremont could have chosen not to, and vice versa. Communities throughout the state would have had that choice if the bill had passed.
On January 21, at Rep. Friedmann’s last meeting as vice chair of the Bar Harbor Town Council, the councilors unanimously supported a resolve saying that they would support a local option lodging tax to reduce dependency on property taxes by municipalities.
RATIONALE FOR THE TAX
In material Rep. Friedmann passed out at the January meeting with Bar Harbor Chamber of Commerce members, it states, “Maine residents face the highest property tax burden in the U.S. with the average homeowner spending 4.86% of their income on property taxes—more than other states in the nation.”
Maine is also one of three states that do not allow local lodging taxes. The others are Connecticut, which has a 15% state lodging tax, and New Hampshire.
“Maine’s reliance on property taxes to fund essential services like public safety and sewer means homeowners are covering the costs for visitors who increase demands on these services,” the paper reads.
In Bar Harbor, Rep. Friedmann said, the lodging sales in 2023 were $141,629,456, a 270% increase since 2007. Bar Harbor is not alone in that increased lodging sales. Most towns saw increases of over 100 and 200% in that time frame. Some towns, such as Dover-Foxcroft and Trenton had increases over 300%. What those numbers will be this year is unknown.
A 2% sales tax on Bar Harbor’s 2023 sales would have generated $2,832,589. Then, 90% of that number is $2,549,330, or as Rep. Friedmann said, enough to pay the school bond each year.
For some MDI region communitie’s members, like Judith Sproule who has spent years on boards working on budgets for the smaller town of Trenton, Maine, the proposed local option tax offered relief and potentially hope.
“This bill proposes a 2% tax on short-term lodgings to support visitors’ share of the use of a town’s resources, such as public safety, roads, infrastructure, and park upkeep. In legal terms it is a tax, but in practical terms, it is a user fee,” Sproule wrote. “It also laudably supports a statewide need by remitting 10% of the revenue it generates back to the state, specifically to Maine State Housing Authority, to support rural affordable rental housing.”
Sproule was recently elected to the Trenton Select Board.
Back in 2007, Dick Cough, a member of the Local Sales Tax Option Committee in Bar Harbor held sessions and had an action plan intended to gather regional support for a local option sales tax. That effort also failed as had smaller local efforts before and after.
BILL’S LACK OF SUPPORT
Unlike Sproule and Rep. Friedmann, others worried that it would be a potential burden on businesses and a deterrent to visitors.
Typically, opponents to local option taxes use logic similar to the Maine Center for Economic Policy’s Sarah Austin’s.
Auston wrote, “The ten municipalities with the highest meals and lodging sales in the state generate 45 percent of the state’s meals and lodging tax revenues. But those same ten municipalities are home to just 16 percent of the population. Similarly, the ten municipalities with the highest total taxable sales in our state generate 42 percent of all sales tax revenue but represent only 19 percent of the state’s population.”
In the end, both Maine houses of the legislature voted against it. The bill failed the house 77-70. Rep. Holly Eaton (D-Deer Isle) had an excused absence due to health reasons resulting from a car accident. Eaton’s district covers part of Mount Desert Island.
The vote was not quite as close in the Senate where it failed 26-7 with two excused absences. Senator Nichole Grohoski (D-Ellsworth) voted in support.
As explained by the Sales Tax Handbook, “A local option sales tax is a municipal sales tax administered by a local government body, often a county or city. Local option sales taxes can also be administered by local transportation districts, school districts, recreation districts, and other special local government divisions.
“Traditionally, municipal governments rely on personal property taxes for the majority of their tax revenue. However, local option sales taxes account for a bit over 11% of all municipal tax revenue nationwide. In certain states, especially in the south, municipal governments are more reliant on sales taxes for revenue and thus levy higher local-option tax rates.”
Maine does not currently allow local option sales tax or lodging tax. Many other states do. Efforts to pass local option taxes have come before the legislature for decades and have been consistently voted down.
LINKS TO LEARN MORE
Lincoln Millstein’s Quietside Journal article yesterday first discussed the results.
To read the bill, testimony, and see updates
Bar Harbor Existing Conditions Analysis Report
Could a Local Option Tax Help MDI?
Latest Local Lodging Tax Legislation Fails
QUICK NOTE FROM US:
Due to a glitch, four founding members were left off our original article when it first went out. We’ve updated that in the original article, but we also want to make sure that everyone saw these four groups, too, because everyone’s support is a really big deal to us.
Follow us on Facebook. And as a reminder, you can easily view all our past stories and press releases here.
If you’d like to donate to help support us, you can, but no pressure! Just click here (about how you can give) or here (a direct link), which is the same as the button below.
If you’d like to sponsor the Bar Harbor Story, you can! Learn more here.
Once again, the Maine Legislature has rejected Bar Harbor’s reasonable request for a local-option sales tax—despite the town’s outsized role in generating tourism revenue for the entire state. Year after year, lawmakers from communities that don’t share the same economic burdens or visitor impact vote it down. But fairness demands a different approach. Bar Harbor shoulders the costs of hosting millions of visitors annually. Giving the town a modest tool to manage that strain isn’t special treatment—it’s common sense.
I wonder how much MDI towns invested in lobbying for this bill. If not much, we should consider playing the lobbying aspect differently next time. Given that opposition to the bill seems to be borne more out of ignorance of the facts than out of ideology, one would think minds in Augusta can be changed.