Favoritism, Maine's Image, Greedy Tax Mongers And Old Fashioned Politics May Keep Cabela's Out Of Maine

I just finished reading an article this morning in the KeepMeCurrent.com by Victoria Wallack and came away fuming. I just don’t get it. I am beginning to believe that Maine, its politicians and residents, are so mired into protecting some fanciful “image” that it is going to destroy itself.

At issue is the outdoor equipment retail store Cabela’s looking to open a store in Scarborough. They are now threatening to pull out of their proposal to locate there if the state doesn’t grant them some kind of tax break similar to the one given to  competitor L.L. Bean.

The tax break is part of a bill passed exempting L.L. Beans from paying a personal tax on equipment. Wallack explains it best.

That bill eliminates the property tax on equipment for manufacturers that business groups have been saying discourages new companies from coming to Maine and existing ones from expanding here. It leaves the tax in place, however, for storefront retail operations.

The exemption in it for L.L. Bean largely puts the homegrown retailer in the same class as manufacturers, while other local retailers have to pay the tax and then do the paperwork to get a reimbursement from the state under the Business Equipment Tax Reimbursement program or BETR.

The carve-out for L.L. Bean was essentially a continuation of an exemption tucked into a massive state budget bill last year and unabashedly nicknamed the “anti-Wal-Mart” amendment. It required all national retailers with stores of 100,000 square feet or more, except for L.L. Bean, to pay the business equipment tax with no reimbursement. That provision was continued in the BETR bill passed this April, with overwhelming support in the Legislature.

It is no secret that Leon Gorman, owner of Beans, fully supports Governor Baldacci. I don’t think I would be remiss in saying this tax break is a payback.

What Cabela’s is asking for is a break on sales tax from it’s catalog and Internet sales from Maine residents.

The fast-growing and very popular retailer of outdoor and sportsmen’s gear doesn’t want to charge sales tax on its catalog and Internet sales in Maine if it builds a store here – a so-called use-tax that L.L. Bean charges on all its catalog and Internet sales in Maine and anywhere else it has a retail outlet.

Bean says the tax break would create an uneven playing field in Maine because people could go to the Cabela’s store, check out the merchandise, and then go order it via the Internet or a catalog without paying a tax.

Cabela’s claims that in the 19 other states where it has or is planning a retail store, the exemption has been granted through a ruling from the states’ revenue departments. They have determined the company’s retail operation is sufficiently separate from its catalog and Internet sales to allow for the sale tax exemption. If Cabela’s doesn’t get a similar ruling in Maine, store representatives say it won’t build here.

I think that it would be in the best interest of Maine to work out some kind of solution so that both retailers can exist here but I’m not sure that it will happen. The development in Scarborough, which would be anchored by Cabela’s as the major retailer, promises 800 new jobs, something Maine is desperate for. Economics 101 teaches that competition benefits the consumer.

L.L. Beans has had a monopoly as a retailer of outdoor gear with some competition coming from the Kittery Trading Post. One can only assume that a successful retailer like Cabela’s has done their homework and knows that Maine can support another store of its kind.

Those who voted for the bill are saying that the intent was to encourage manufacturers to move their headquarters to Maine. They say this is the kind of business Maine is looking for.

They use L.L. Bean as an example of how a business could move its headquarters here and enjoy the same tax breaks.

Sen. Ethan Strimling, D-Cumberland County and a member of the Taxation Committee, supports the Bean break, but is opposed to Cabela’s request, and will sponsor legislation to overturn the sales tax exemption if it is offered by the Maine Revenue Services.

He says the difference is the business tax exemption offered to Bean is available to other national retailers, if they move their headquarters here.

“If Cabela’s moved their headquarters to Maine, they would get the exemption. That was the philosophy behind it,” said Strimling, to attract national chains that can make their corporate headquarters wherever they chose. “If you can live anywhere, you can live here.”

Is this another one of those “quality of life” quotes that so many speak of in Maine – essentially that it’s okay to be poor and destitute because the quality of life in Maine more than makes up for it?

“It shows legislative intent to foster the kind of Maine-based business that L.L. Bean is. L.L. Bean is part of the state’s image,” said Rep. Thomas Watson, D-Bath, another member of the Taxation Committee. “Right now, L.L. Bean is the only one that qualifies. It’s an incentive for major retail to get stated here and get Maine-based.”

If this is so true, I wonder how many manufacturing companies or for that matter, similar retailers have inquired about moving their headquarters to Maine? Maybe a call to the Maine Chamber of Commerce could answer that question – but I doubt it.

I think it is clear why Maine needs some changes when it comes to taxes. Under Baldacci’s watch, taxes in Maine have strapped the people there to the point where the state has become the most taxed in the nation. It seems everyone sitting on the Taxation Committee shares the same view. I think that view is let’s carry the load of the Maine economy pandering to L.L. Bean.

Even the chairman of the Taxation Committee agrees and sees Bean as “the kind of business they want”.

Rep. Dick Woodbury, an independent from Yarmouth and House chair of the Taxation Committee, agreed.

“The intent of eliminating the business equipment tax was to encourage new businesses to come to Maine and existing businesses to expand,” Woodbury said. If a national retail company wants to base its operations here, “that’s the kind of business we want to attract to Maine and that’s the reason we put the provision in place.”

This is the same old story. It’s been written in chapter after chapter in the book on Maine’s economy. It seems that when opportunities present themselves for more jobs and competition in the marketplace, it gets run out of the state because it doesn’t necessarily fit the mould that Maine is looking for.

I certainly don’t want Maine to become one large strip mall but this image thing has got to go. I think it was an intelligent thing to offer Bean’s a tax break to spur on growth and expansion. Let’s just not be exclusionary because L.L. Beans is some politicians supporter. Offering a tax break on manufacturing equipment probably will have little effect on convincing companies to headquarter in Maine. Take a look around. The corporate taxes, sales taxes, taxes, taxes, taxes, are sinking business there now.

800 jobs is nothing to sneeze at and Maine consumers need competition to keep the prices of their outdoor gear down. This benefits everyone. Competition is good. Playing politics at the expense of the consumer is bad.

I think it is time for massive changes in Augusta.

Tom Remington