It's simple - scale the toll on the highway, and add a few more toll booths near the border. Turnpike should stay $4 for ME residents, be $5 for NH, and $8+ for MA and beyond. and at the currently un-tolled exchanges (Kittery, Dover, etc), $0 for ME & NH and $2+ for MA and beyond. And increase hotel taxes even more.
I also think property taxes should be more if you don't live here. Not significantly, but something. That'll cut down on the out-of-state conglomerate AirBNB buying.
Similarly, I’ve long thought tourism-heavy countries facing concerns of cultural erosion (Croatia, Japan, Italy) should charge (or charge more) for visas.
What if the government partially subsidized Airbnbs in Maine, Telluride, and similar for seasonal workforce housing (but not for tourists)? I’m just spitballing
Just one little bit of local color about this region for this who would be otherwise unaware:
Downeast Maine is home to one of the nation's premiere schools of orchestral conducting and performance, a summer school in Hancock which was founded by the great French conductor Pierre Monteux, who conducted the world premiere of Stravinsky's “The Rite of Spring” and went on to become the music director of the Boston Symphony.
I spent seven summers there as a student and staff member. Thankfully the school has enough on-campus buildings to house all the students!
This is a great post. Still mulling the specifics, but the higher level insights about the opportunities and challenges are correct. I live in Maine and just concluded a 6-year tenure in town government as an elected official in a wealthy (but not touristy) coastal town. I see the dynamics Matt describes play out every day, along with the consequences.
To expand a bit: Maine has high cost of living wherever there are decent professional jobs, relatively low wages for those same jobs, and one of the highest tax burdens in the country. Maine has a history of successful businesses moving out of state once they scale to a certain size, largely because the local skilled labor pool is bad (and getting worse) and it is difficult to recruit people to move here.
What Matt's post hints at is that current system of revenue generation in Maine incentivizes behavior that contributes to that dynamic. Maine incentivizes investment in the tourism industry (very high corporate taxes but low state sales tax and no local sales taxes plus various explicit incentives) and second homeownership in seasonal enclaves (the property taxes on our family's "camp" on a lake in Maine are fraction of the property taxes we pay for our similarly valued primary house because the lake community has very few full-time residents with kids in school and provides almost no public services). These incentives crowd out investment in non-seasonal businesses and create negative externalities that are taxed at a lower rate. Therefore the bulk of the public revenue is collected from professionals with families -- which would be fine and normal if that pool weren't small and shrinking. Maine is now the oldest state in the nation and has the second lowest share of school-aged children (after Vermont).
If it isn't obvious, the above dynamics are a major reason that pool is shrinking. Maine is unattractive to professionals even where there are good jobs available due to the combination of cost of living, high marginal and overall taxes, and limited opportunities for professional spouses and changing jobs locally. We are stuck in a negative flywheel.
Interesting take! I've visited coastal Maine a couple times in the past two years for weddings. I was struck by how it felt kind of poor and empty east of roughly the Schoodic Peninsula. The roads were in bad shape (even by cold climate standards) and many towns seemed run-down and neglected, even right on the ocean.
In your opinion, what could be done for Maine? Would some changes to the tax structure help?
I did an overnight trip to Campobello Island (New Brunswick) and it seemed to be struggling more than adjacent eastern Maine. I suspect the combination of physical remoteness and a border crossing limit the tourist money.
Yes I think the tax structure in Maine is pretty bad (skewed toward "seniors" and against professionals with families). Housing issues are also a major driver, and any plan that is going to get us out of the death loop requires big changes to how housing and real estate development is regulated.
My plan for Maine:
1. YIMBY policies at state level (some progress has been made here but it's not sufficient to make a major difference yet)
2. Something along the lines of Matt's idea to tax tourists more [comments have suggested a few alternatives]
3. Local Sales Tax option
4. Reduce state income taxes (both personal and business)
5. Eliminate real estate transfer taxes
6. Eliminate various forms of "senior tax relief" and other state subsidies for seniors
7. Eliminate most of the new mandates for public schools created over the past 6 years, which have dramatically increased the baseline cost of public education, making Maine one of the highest spending states in the US without any measurable benefit to outcomes (test scores have gone down significantly in both absolute terms and in relative terms [now worse than Mississippi])
8. Increase spending on postsecondary education (currently among the lowest in the US), including both U Maine and the community college system
There are a bunch of other things I'd change about how the state is governed (and don't get me started on Portland) but the above is what I'd prioritize
Many places have this type of issue resolved. You offer free or reduced fee services and have taxes to pay for them. The people who actually live here year round make use of them and people who are not are still taxed but don’t pay for them.
a) making sure that the tourist services that a cruise ship provides is taxed just like on-shore services.
b) taxing the congestion o public spaces or other negative externalities caused by tourists.
The first is just ordinary tax admisntration. The second is a matter of estimating the value of the externality (estimating the optimal amount of the externality) and finding an administratively feasible way of collecting the Pigou tax.
It seems like there's a bit of a game here on what we mean by "Maine". It's local governments who feel like they aren't benefiting from tourists, but as far as I can tell your proposals are for state level taxes. Well that's great for "Maine" but won't the locals in tourist areas feel like they're taking on all the work of hosting tourists while the people in the non-tourist areas reap the rewards as the state income is distributed equally? While on the other hand, people living in the non-tourist areas see their sales tax rise in the summer for basically no reason from their perspective.
Wouldn't a better solution be to allow local governments to impose local sales taxes, even season local sales taxes as you suggest? I don't know if that would just be a legislative change or a state constitution change, but even if it's a state constitution change those aren't as impossible to get through as national constitution changes are.
You're right but they're not dynamic or adaptive, which is why Congress has to pass some spending bills throughout the year and there's so much tinkering of the tax code and stimulus bills.
They often *are* dynamic and adaptive, but in ways that made sense for human bureaucracies to implement decades ago, rather than being responsive to formalized data streams.
You're right. I'm not thinking of being adaptive to real time data but more like quarterly GDP numbers or monthly revenues or deficits or inflation rate or whenever there's a downturn. I don't think they are that smart to adapt to those situations but can be easily made to be.
Yeah, I like things like the Sahm Rule, triggering automatic extensions of unemployment benefits, or automatic stimulus checks, when unemployment gets higher than some amount: https://en.wikipedia.org/wiki/Sahm_rule
William Vickery couldn't have said it any better.
This seems like an awfully complex solution to a problem where you could just raise taxes generally and then send people checks or something.
From my ME-based friend, his solution:
It's simple - scale the toll on the highway, and add a few more toll booths near the border. Turnpike should stay $4 for ME residents, be $5 for NH, and $8+ for MA and beyond. and at the currently un-tolled exchanges (Kittery, Dover, etc), $0 for ME & NH and $2+ for MA and beyond. And increase hotel taxes even more.
I also think property taxes should be more if you don't live here. Not significantly, but something. That'll cut down on the out-of-state conglomerate AirBNB buying.
Similarly, I’ve long thought tourism-heavy countries facing concerns of cultural erosion (Croatia, Japan, Italy) should charge (or charge more) for visas.
Isn't' the obvious retort here that the seasonal residents and tourists will go elsewhere, a la NYC/CA exodus and TX/FL growth?
The ship is not in international waters when it's docked.
What if the government partially subsidized Airbnbs in Maine, Telluride, and similar for seasonal workforce housing (but not for tourists)? I’m just spitballing
If Maine could just figure out a way to tax the mosquitoes in the summer, it’d be rich
Seasonal tax on black flies in June?
I just know if you’re going to have a waterfront wedding in Bar Harbor, don’t do it at sunset. The mosquitoes were the size of hummingbirds
“I would put a tax on all foreigners living abroad!” Monty Python, Tax Thingy sketch
America taxing foreign countries’ citizens to reduce taxes at home sounds like a political winner. Fuck you, Paraguay! Pay tribute or else! /s
Just one little bit of local color about this region for this who would be otherwise unaware:
Downeast Maine is home to one of the nation's premiere schools of orchestral conducting and performance, a summer school in Hancock which was founded by the great French conductor Pierre Monteux, who conducted the world premiere of Stravinsky's “The Rite of Spring” and went on to become the music director of the Boston Symphony.
I spent seven summers there as a student and staff member. Thankfully the school has enough on-campus buildings to house all the students!
Short-term rental (STR) bans are exceptional at one thing:
Preserving margin for existing STRs and hotels.
Restrict supply and keep prices high!
This is a great post. Still mulling the specifics, but the higher level insights about the opportunities and challenges are correct. I live in Maine and just concluded a 6-year tenure in town government as an elected official in a wealthy (but not touristy) coastal town. I see the dynamics Matt describes play out every day, along with the consequences.
To expand a bit: Maine has high cost of living wherever there are decent professional jobs, relatively low wages for those same jobs, and one of the highest tax burdens in the country. Maine has a history of successful businesses moving out of state once they scale to a certain size, largely because the local skilled labor pool is bad (and getting worse) and it is difficult to recruit people to move here.
What Matt's post hints at is that current system of revenue generation in Maine incentivizes behavior that contributes to that dynamic. Maine incentivizes investment in the tourism industry (very high corporate taxes but low state sales tax and no local sales taxes plus various explicit incentives) and second homeownership in seasonal enclaves (the property taxes on our family's "camp" on a lake in Maine are fraction of the property taxes we pay for our similarly valued primary house because the lake community has very few full-time residents with kids in school and provides almost no public services). These incentives crowd out investment in non-seasonal businesses and create negative externalities that are taxed at a lower rate. Therefore the bulk of the public revenue is collected from professionals with families -- which would be fine and normal if that pool weren't small and shrinking. Maine is now the oldest state in the nation and has the second lowest share of school-aged children (after Vermont).
If it isn't obvious, the above dynamics are a major reason that pool is shrinking. Maine is unattractive to professionals even where there are good jobs available due to the combination of cost of living, high marginal and overall taxes, and limited opportunities for professional spouses and changing jobs locally. We are stuck in a negative flywheel.
Interesting take! I've visited coastal Maine a couple times in the past two years for weddings. I was struck by how it felt kind of poor and empty east of roughly the Schoodic Peninsula. The roads were in bad shape (even by cold climate standards) and many towns seemed run-down and neglected, even right on the ocean.
In your opinion, what could be done for Maine? Would some changes to the tax structure help?
I did an overnight trip to Campobello Island (New Brunswick) and it seemed to be struggling more than adjacent eastern Maine. I suspect the combination of physical remoteness and a border crossing limit the tourist money.
Yes I think the tax structure in Maine is pretty bad (skewed toward "seniors" and against professionals with families). Housing issues are also a major driver, and any plan that is going to get us out of the death loop requires big changes to how housing and real estate development is regulated.
My plan for Maine:
1. YIMBY policies at state level (some progress has been made here but it's not sufficient to make a major difference yet)
2. Something along the lines of Matt's idea to tax tourists more [comments have suggested a few alternatives]
3. Local Sales Tax option
4. Reduce state income taxes (both personal and business)
5. Eliminate real estate transfer taxes
6. Eliminate various forms of "senior tax relief" and other state subsidies for seniors
7. Eliminate most of the new mandates for public schools created over the past 6 years, which have dramatically increased the baseline cost of public education, making Maine one of the highest spending states in the US without any measurable benefit to outcomes (test scores have gone down significantly in both absolute terms and in relative terms [now worse than Mississippi])
8. Increase spending on postsecondary education (currently among the lowest in the US), including both U Maine and the community college system
There are a bunch of other things I'd change about how the state is governed (and don't get me started on Portland) but the above is what I'd prioritize
Many places have this type of issue resolved. You offer free or reduced fee services and have taxes to pay for them. The people who actually live here year round make use of them and people who are not are still taxed but don’t pay for them.
This discussion seems confused between:
a) making sure that the tourist services that a cruise ship provides is taxed just like on-shore services.
b) taxing the congestion o public spaces or other negative externalities caused by tourists.
The first is just ordinary tax admisntration. The second is a matter of estimating the value of the externality (estimating the optimal amount of the externality) and finding an administratively feasible way of collecting the Pigou tax.
[a ban on local governments imposing sales taxes]
It seems like there's a bit of a game here on what we mean by "Maine". It's local governments who feel like they aren't benefiting from tourists, but as far as I can tell your proposals are for state level taxes. Well that's great for "Maine" but won't the locals in tourist areas feel like they're taking on all the work of hosting tourists while the people in the non-tourist areas reap the rewards as the state income is distributed equally? While on the other hand, people living in the non-tourist areas see their sales tax rise in the summer for basically no reason from their perspective.
Wouldn't a better solution be to allow local governments to impose local sales taxes, even season local sales taxes as you suggest? I don't know if that would just be a legislative change or a state constitution change, but even if it's a state constitution change those aren't as impossible to get through as national constitution changes are.
Bans on LOTs are really high up on my list of evil things that state preemption does.
I have a dream that one day, laws will be written as algorithms instead of thousands of pages of legal jargon.
The thousands of pages of legal jargon *are* algorithms, I would argue.
You're right but they're not dynamic or adaptive, which is why Congress has to pass some spending bills throughout the year and there's so much tinkering of the tax code and stimulus bills.
They often *are* dynamic and adaptive, but in ways that made sense for human bureaucracies to implement decades ago, rather than being responsive to formalized data streams.
You're right. I'm not thinking of being adaptive to real time data but more like quarterly GDP numbers or monthly revenues or deficits or inflation rate or whenever there's a downturn. I don't think they are that smart to adapt to those situations but can be easily made to be.
Yeah, I like things like the Sahm Rule, triggering automatic extensions of unemployment benefits, or automatic stimulus checks, when unemployment gets higher than some amount: https://en.wikipedia.org/wiki/Sahm_rule