Maine’s Water Extraction Tax Proposal Is Poor Tax Policy

Lawmakers in Maine’s 129th legislature have proposed a bill (HP 797) to impose an excise tax of 12 cents per gallon on water extraction performed by each bottled water operator that extracted more than 1 million gallons of groundwater or surface water in the previous calendar year. This plan purports to stimulate the economy of rural Maine, and credits new revenue to the Water Trust Fund. Specifically, 65 percent of the revenue would be earmarked to develop high-speed broadband infrastructure. The remaining 35 percent would be directed to provide tuition grants for postsecondary education for up to two years. The proposal for a water extraction tax, which is not a new idea in Maine, is poor tax policy because it is nonneutral and unstable, and it would open the way to taxing renewable resources. Three previous bills in Maine’s legislature attempted to impose similar excise taxes at various rates and for various purposes; all were rejected. In 2009, HP 191 was…

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