Why did Gov. Mills bury an unpopular streaming tax in her budget proposal?
On March 1, the Maine Revenue Forecasting Committee released an updated report finding that Maine would have an extra $108 million in surplus revenue through the fiscal year which must be appropriated to balance the state’s budget. Despite the ongoing debate about how to spend this and other existing unappropriated surplus, it’s worth noting that the governor tried to hide a new digital streaming tax in the first iteration of her supplemental budget proposal.
It’s hard to understand why the governor would do this, particularly when you consider that in 2022 she said, “I don’t think there’s a need to go into raising any taxes whatsoever and I have said I’m opposed to raising taxes.” This is a promise the Gov. has broken before–just last year, in fact, during the debate over the state’s new paid family leave policy, which includes a new payroll tax. Despite these public statements, her administration sought to conceal this unpopular policy deep in the governor’s spending proposal.
A streaming service tax has been proposed before by both Gov. Paul LePage in 2017 and Gov. Janet Mills once already in 2020, but both previous attempts were unsuccessful. This failure is partly because those governors faced backlash connected to the disproportionate impact streaming taxes have on young people, as well as the impact all sales taxes tend to have on the poor in general. It’s also hard to argue that Maine needs to collect more tax revenue when it’s seemingly in a state of perpetual surplus.
The current proposal is slightly more nefarious than these previous ones considering the circumstances. Once the Revenue Forecasting Committee identified unappropriated surplus revenues for Maine in the current fiscal year, Gov. Mills attempted to slip this provision into her supplemental budget proposal. But one must ask why it was not in her budget proposal last year when lawmakers were debating the state’s biennial budget. If this revenue is so important to Gov. Mills, why was the tax excluded from her original biennial budget request?
Regardless of one’s perspective on whether streaming services should be included in the state sales tax, it simply does not make sense to ask Mainers to pay more sales taxes when the state has hundreds of millions of dollars in unallocated surplus. Imposing a new tax like this was already hard to fathom when the state learned it had surplus revenue back in December. A new streaming tax is even more confusing when you consider the state is anticipating even more surplus revenue today than it was back then.
This move looks even worse when you account for the many obstacles that arise when attempting to tax streaming services. The most obvious is password sharing, which more than one-in-five streaming customers report doing, and this number rises to one-in-three consumers when focused on the Gen Z demographic.
Another major obstacle is the ease with which one can circumvent the tax. When levying streaming taxes, “providers are expected to designate the customer’s billing address as the taxable location,” so a Maine resident wishing to circumvent the tax can simply list their billing address as somewhere out of state, which is particularly easy for those who have a second residence in another jurisdiction.
Gov. Mills’ decision to impose this new tax amid a surplus is another example of the governor going back on her no-tax pledge during her last campaign. Considering the state has plenty of money and the many ways to circumvent this tax, it should not be included in the final supplemental budget. Hopefully, the governor’s administration and the Appropriations Committee will approve a plan that spends surplus funds responsibly and without new tax increases on hardworking Mainers.