Why Maine Can’t Replace Property Taxes with Sales and Tourist Taxes—and What We Could Do Instead

Written By dKay in Maine

Every so often, a new idea pops up on social media that sounds almost too good to be true:

“Maine should abolish property taxes and replace them with sales and tourist taxes. That way, the burden shifts to visitors instead of year-round residents.”

On the surface, it feels appealing. Maine is Vacationland, after all (even though critics say that we’re turning into Taxationland instead). If millions of people come here each year to enjoy our coast, lakes, mountains, lobster rolls, and small-town charm, why shouldn’t they chip in more? Wouldn’t it be fairer to tax tourists and spare homeowners?

However, once you look at the numbers, the story changes. Completely replacing property taxes with sales and tourism taxes wouldn’t provide the stable revenue our towns depend on.

What Property Taxes Pay For in Maine

First, let’s understand the scale. In 2023, Maine municipalities raised $3.166 billion in property taxes statewide (the “commitment”), which paid for:

  • Public schools

  • Fire and police services

  • Roads, plowing, and emergency response

  • Libraries, recreation, and community programs

They are the most stable ones and the highest for municipalities in the state. Property tax doesn’t swing up and down with tourist seasons or recessions the way sales tax does. That stability is why towns rely on it.

Of that $3.166 billion, an estimated 55–60% comes from residential property (roughly $1.9 billion). The rest is from commercial and industrial property—businesses, utilities, and equipment.

So even if we “only” talk about replacing residential property tax, we’re already facing a $1.9 billion gap.

Why Sales and Tourism Taxes Can’t Replace Property Taxes

Let’s put that $1.9 billion into perspective with Maine’s tourism economy.

In 2024, visitors to Maine spent $9.23 billion on lodging, meals, shopping, transportation, and entertainment. That’s a considerable number, but remember: we’d need to extract $1.9 billion in taxes from that base just to replace the residential portion of property taxes.

Here’s what that looks like in practice under a 50/50 shared model — residents and tourists each carry half the load:

  • Visitors (lodging + meals): +21.3% surcharge on top of today’s 9% lodging tax and 8% meals tax.

  • Residents (general sales tax): +2.75 percentage points added to the 5.5% sales tax, bringing it to 8.25%.

To put it in relation, here’s what this change would mean for products we all know:

  • A $27.99 lobster roll becomes $36.67.

  • A $200 hotel room becomes $264.43.

  • A $4.99 loaf of bread becomes $5.41.

And this is just one of the potential split models. Tilt the balance differently, and the numbers—and impact—change. Expand each section to see how the math (and your bill) would change.

  • Increase the prices for meals, and locals and visitors feel it every time they eat out or take a weekend trip. Maine already charges an 8% meals tax on prepared food and alcoholic drinks sold in restaurants and bars licensed for on-premises liquor consumption, as well as on take-out meals, fast food, and catering.

    That means higher rates wouldn’t just hit tourists dining in Portland’s Old Port — they’d hit families grabbing pizza on a Friday night, parents picking up take-out after work, or a wedding that hires a local caterer. While it might seem reasonable to raise meal and lodging taxes on people who only vacation here once a year, it looks very different for those of us who live here year-round and pay that tax every week.

  • Raise the prices on lodging, and the impact doesn’t stop at tourists. Maine applies a 9% lodging tax on hotels, motels, bed & breakfasts, inns, boarding houses, and short-term rentals (like Airbnb). The same rate also applies to cabins, cottages, and campgrounds when rented for fewer than 28 days.

    In practice, that means it’s not just a Boston family vacationing in Bar Harbor who pays more—it’s also Maine residents who book a night in Portland for a concert, rent a lakeside cabin for a weekend, or take their kids camping.

    In addition, there’s a 10% tax on short-term rentals of automobiles, pickup trucks, and vans under 26,000 pounds when rented from businesses primarily engaged in short-term car rentals. That means higher rates wouldn’t just hit out-of-staters booking hotels—they’d also affect Mainers renting a van for a weekend move or a car while theirs is in the shop.

    But notice who doesn’t feel those increases: second-home owners. Someone with a lakefront or coastal house can bypass lodging altogether, meaning they avoid both the higher room rates and, if property taxes were to disappear, a major tax bill as well.

  • Push more onto sales tax, and it’s not just grocery bills and clothing costs that rise. Maine’s 5.5% sales tax applies to a wide range of everyday purchases and services, including retail goods, clothing, appliances, furniture, and even products delivered electronically (like downloads and e-books). It also covers things people don’t always think of—the transmission and distribution of electricity, prepaid calling cards, extended service contracts on cars and trucks, as well as the rental or lease of vehicles, campers, motor homes, and even pickup trucks or vans. Raising sales tax rates means every household, from renters to homeowners, pays more every time they shop, power their homes, maintain a car, or rent equipment.

Visitors might not feel all of these increases directly, for example, higher electricity delivery costs show up on Mainers’ utility bills, not on a tourist’s weekend trip. The only way visitors feel it is indirectly, when rental hosts fold higher utility bills into room prices, which means that $200 hotel room could creep upward even before the lodging tax is applied.

Mainers Vacation in Maine, Too

I mentioned it above, but I think it’s worth highlighting that it’s not just out-of-staters who’d pay more for hotel rooms. Mainers themselves book about one-third of all lodging stays in Maine. In 2024, resident overnight visitors spent $1.415 billion on in-state travel. That means higher lodging taxes hit local families who take a weekend at the beach or rent a cabin in the mountains just as much as they hit tourists from Massachusetts.

So, when we say a $200 room becomes $264, we’re not just talking about visitors—we’re talking about Maine residents, too.

Seasonality and the Distribution Problem

Tourism revenue isn’t just limited—it’s also highly seasonal and concentrated.

  • Coastal and resort towns like Bar Harbor, Ogunquit, and Portland generate huge tourism dollars.

  • Rural inland towns see little of that spending.

Region/Town

Tourism Spending / Impact
Greater Portland & Casco Bay $1.76 billion in visitor spending (2024)
Down East & Acadia area $1.3 billion in visitor spending (2024)
Midcoast Region (Rockland, Camden) Draws ~35% of Maine’s visitors annually (2023)
Ogunquit $3 million/year in parking revenue (~27% of 2024 town budget)
Old Orchard Beach ~$500 million; highly seasonal economy reliant on summer tourism (2023)
Rural inland towns Minimal compared to coastal areas; rely almost entirely on property taxes

*Latest available year shown; sources linked at the bottom.

As this table shows, towns like Portland, Bar Harbor, and Ogunquit thrive on visitor dollars, while rural counties see much smaller totals. Aroostook County, for example, generated about $170 million from tourism in 2024—a fraction of Greater Portland’s $1.76 billion. If property taxes were abolished, how would you fund schools in places like Aroostook or Oxford, where visitor revenue is far smaller? Any statewide plan would require a major redistribution system—essentially recreating what the property tax already does, but less predictably.

And even in high-traffic towns, tourism is volatile. A bad summer, a recession, or even just a rainy July can shrink revenue dramatically. Property taxes don’t collapse when the weather turns—which is exactly why towns depend on them to keep schools open, fire trucks running, and roads plowed.

Legislative Reality Check: LD 632 and LD 746

This year, Maine lawmakers considered two modest proposals:

  • LD 632 would have allowed towns to levy a local-option lodging tax, with the revenue earmarked for affordable housing. It was voted Ought Not to Pass in committee and died in April 2025.

  • LD 746 proposed a similar local-option lodging tax, but with funds split between municipalities and housing programs. It advanced further, with a majority of the Taxation Committee recommending passage; however, the House rejected it 70–77, and the Senate rejected it 7–26 in June 2025.

Neither bill asked to abolish property taxes or dramatically hike rates—they simply gave towns the option to add a few percentage points on lodging. Both bills failed.

If the Legislature wasn’t willing to approve even a narrowly targeted lodging tax for housing and municipal relief, the idea that Maine could replace billions in property taxes with sky-high tourist surcharges raises serious practical challenges.

Who Really Benefits

Here’s the part that rarely gets mentioned: abolishing property taxes would be a windfall for non-residents.

  • Roughly 22–26% of Maine’s housing stock is second or seasonal homes.

  • In 2024, 31% of homes sold went to buyers from out of state.

Currently, non-resident owners contribute through property taxes, regardless of whether they reside here full-time. If property taxes disappeared, they’d pay little or nothing—while year-round Mainers would shoulder the higher costs every time we shop, dine, or vacation in our own state.

Another winner would be high-income households with expensive properties. A family in Cape Elizabeth or Falmouth paying $20,000+ in property taxes could see that entire bill disappear. Even if their grocery and dining costs rose by a few hundred dollars a month under higher sales and meals taxes, they’d still come out tens of thousands ahead every year.

Of course, not everyone in those towns falls into that category. Many residents pay more modest property taxes, but it’s the handful of owners with high-value waterfront homes or large acreage who would see the biggest windfall, while everyone else, both in those communities and across Maine, would face higher costs on everyday essentials.

Who Really Loses

And while high-income households would win, the burden would shift squarely onto those least able to absorb it:

  • Lower-income homeowners: Families in rural towns who pay $2,000–$3,000 in property taxes might save that bill, but higher sales taxes on groceries, clothing, electricity, and fuel would quickly eat away at those savings. Since households with a lower income spend a greater share of their income on everyday essentials, the weekly increases at the checkout line could outweigh the relief from eliminating property taxes. In practice, they would pay more often, in smaller bites, without ever seeing the promised benefit.

  • Renters: Even renters—who might seem poised to benefit from a potential rent decrease—end up worse off. After California’s Prop 13 capped property taxes, research found that rents didn’t drop; instead, renters stayed in place longer (an 18–19% increase in tenure), suggesting landlords didn’t pass on tax savings. Economists call this the “lock-in effect”: renters felt stuck because affordable alternatives weren’t available. Ultimately, it is housing demand, not property-tax levels, that drives rental prices. So, Maine renters are unlikely to see reduced rents if property taxes disappear—but they will face higher sales, meals, and lodging taxes, with no offset.

  • Year-round Mainers in general: Since about one-third of hotel stays in Maine are booked by Maine residents, locals would face higher lodging costs when they vacation at home, too. So, while a Mainer paying $5,000 a year in property taxes might feel some relief, just a few weekend trips, paired with eating out and the higher sales tax on groceries and essentials, would chip away at that budget. For households paying only $2,000–$3,000 in property taxes, the math tips even faster—the new costs could outweigh the savings in a single summer.

The following examples use Maine’s average property tax rate (~1.2–1.4%) and typical household spending patterns to illustrate how the math might play out for different types of homeowners. These are illustrative, not precise, but they highlight the unequal outcomes across income levels.

Example Household (by home value)

Household Income (est.)

Current Property Tax Bill*

Property Tax as % of Income

Added Costs (Sales + Meals + Lodging)

Net Effect if Property Tax Eliminated
Modest home (~$150k–$200k) ~$50,000 $2,000–$3,000 4–6% ~$2,000–$3,500 Likely worse off—higher everyday costs outweigh savings
Mid-range home (~$300k–$350k) ~$70,000 ~$5,000 7% ~$2,500–$3,500 Break-even at best—savings eroded quickly
Upper mid-range home (~$500k–$600k) ~$100,000 ~$7,000–$8,000 7–8% ~$3,000–$3,500 Modest winners—save some, but not dramatically
High-value home (~$800k–$1M) ~$150,000 ~$10,000–$14,000 7–9% ~$3,500–$4,500 Clear winners—keep $6,000–$10,000 even after new costs
Very high-value home ($1.8M+) $250,000+ $20,000+ 8% or less ~$4,000–$5,500 Biggest winners—still save $15,000+ annually

*Based on Maine’s average property tax rate of ~1.2%–1.4% of assessed value.

But there’s one component the table doesn’t reflect. Not everyone with a high-value home has the income to match. In South Portland, a 2024 revaluation significantly increased assessed values—while the mill rate dropped, many homeowners still saw tax bills surge because residential values rose faster than commercial ones. In fact, residential property owners’ share of the tax burden grew from 60% to 71.3%, and some residents saw their taxes jump by over $1,100 annually. The mayor’s suggestion—for seniors to consider a reverse mortgage—struck many as distressing, but it underscores the pressure that fixed-income homeowners are feeling under the weight of a valuation-driven system.

A home may now be “worth” a million dollars, but that doesn’t mean the owner has a high income to match. This mismatch is one of the deepest flaws of the property tax system—and why relief tools like the Property Tax Fairness Credit or expanded exemptions are so important. They keep Mainers from being taxed out of the communities they’ve lived in for decades.

A Better Path Forward

This debate over who should carry the tax burden isn’t new. As I wrote in a previous post, How to Overcome Government Reliance: Simplification & Lowering Government Spending, even in the mid-19th century, politicians like James F. Simmons warned that directly taxing property could “reach the poor as well as the rich” and risk becoming oppressive. Today’s proposals to scrap property taxes may seem like relief, but they risk flipping that equation upside down — letting wealthier non-resident owners off the hook while shifting more of the burden onto everyday Mainers.

Rather than chasing the fantasy of eliminating property taxes, Maine should focus on making the system fairer and less painful for residents. Expand each section below to see what some of the options for Maine are.

    • Current law: Maine’s Homestead Exemption reduces the assessed value of a primary residence by $25,000 for property tax purposes. In 2023, this provided an average benefit of about $345 per household (depending on mill rates).

    • Opportunity: Raising the exemption to $40,000 or more would meaningfully lower bills for year-round homeowners. Neighboring states like Vermont offer higher exemptions ($40,000–$50,000 equivalent).

    • Impact: This relief is automatic, simple, and directly targets Mainers who actually live in their homes full-time.

    • Estimated cost:$75–80M/yr in homeowner relief; state reimburses $57–61M (76%), towns absorb the remainder.

    • Current law: The credit refunds Mainers whose property tax (or rent equivalent) exceeds a set percentage of their income. In 2022, over 80,000 households benefited, with an average credit of about $775.

    • Opportunity: Expanding eligibility thresholds and increasing maximum credits would ensure no household pays an unaffordable share of income in property taxes.

    • Impact: This focuses relief on ability to pay, protecting low- and middle-income families without dismantling the system.

    • Estimated cost:$75–100M/yr if doubled.

    • Why: Roughly 19% of Maine’s housing stock is made up of second or seasonal homes. In 2024, ~31% of homes sold went to out-of-state buyers. These households use local services but often contribute little beyond property taxes.

    • Proposal: A 0.25–0.5% surcharge on non-resident properties could raise tens of millions annually while leaving year-round residents untouched.

    • Precedent: Some states, like Vermont and New York City, are experimenting with luxury or second-home taxes.

    • Estimated revenue:$90–240M/yr (depending on assessment and surcharge rate).

    • Why: The priciest real estate and luxury assets, like yachts and private planes, are concentrated among the wealthiest households, often non-residents.

    • Proposal: A graduated transfer tax (higher rates above $1 million in real estate, or on luxury goods above $250,000) would ensure big-ticket transactions contribute more.

    • However, it’s worth calling out that in 2023–24, LD 1454 proposed raising the transfer tax on the portion of a property’s value above $1 million from $2.20 per $500 to $2.70 per $500. While the bill advanced out of committee, it ultimately failed to pass.

    • Precedent: Massachusetts’ “millionaire’s tax” includes similar progressive surcharges, and several states add luxury taxes on yachts and aircraft.

    • Estimated revenue:$5–15M/yr from real estate alone; more if luxury assets are included.

    • Why: Even though Maine now meets its 55% education funding formula, property taxes are still rising. A reason behind this is how the state spends its revenue. Too often, programs are created or expanded without clear performance data or a return on investment, leaving taxpayers footing the bill while towns are still forced to raise property taxes to cover basics.

    • Proposal: Put essentials first—schools, public safety, infrastructure—and require stronger accountability for every new or existing program. If a subsidy, e.g., trail development, argues with the fact that it will boost tourism, then the state should track and publish whether tourism-driven revenue actually materializes. Programs that don’t deliver should be pared back or eliminated.

    • Precedent: Delaware shows that low property taxes are possible when the state keeps its budget disciplined. There, property taxes make up only7.39% of total revenue compared to 23.44% in Maine (15.46% nationally), and the effective property tax rate is 0.58% of home value, compared to 1.28% in Maine (1.10% nationally). The difference isn’t that Delaware taxes more things—it’s that its budget structure avoids leaning heavily on local property taxpayers.

    • Fix: Maine’s challenge isn’t a lack of taxes; it’s how the budget is managed. If spending were tied to clear outcomes and the basics—schools, roads, public safety—came first, property taxes wouldn’t have to carry so much of the load.

    • Estimated impact: Even modest reductions in underperforming or non-essential programs could shift tens to hundreds of millions back toward easing local tax pressure — relief without raising new taxes.

    • Why: Maine’s economy has shifted toward services, but many remain untaxed. Expanding to cover luxury services (such as high-end recreation, private club memberships, elective cosmetic procedures, and consulting) could raise revenue without compromising essentials like groceries or heating oil.

    • Caution: Any expansion must protect working families by exempting basic services. The goal isn’t to raise costs on everyday life, but to ensure high-end consumption contributes fairly.

    • Estimated revenue:Tens of millions/yr depending on scope (likely $30–50M+).

Proposal

Type

Estimated Annual Impact

Notes
Expand Homestead Exemption Cost $75–80M in homeowner relief (state reimburses ~76%, ~$57–61M) Direct, automatic benefit for ~350–380k households
Strengthen Property Tax Fairness Credit Cost $75–100M Expands income-based relief; protects low/mid-income households
Non-Resident Second-Home Surcharge Revenue $90–240M 0.25–0.5% levy on ~120k–160k seasonal/second homes
Luxury Transfer Taxes Revenue $5–15M (real estate); more if yachts/aircraft included Targets $1M+ property sales and luxury goods
Improving State Budgeting Revenue shift / Cost control Potentially hundreds of millions (depends on priorities) Prioritize essentials (schools, infrastructure, safety). Cut or scale back programs without measurable results. Delaware shows disciplined budgeting can reduce reliance on property taxes without gutting services.
Broader Luxury/Discretionary Service Tax Revenue $30–50M+ Extends tax base without touching essentials
— Net Balance — — Revenue gain: ~$125–300M+
Relief cost: ~$150–180M		 “Improving State Budgeting” could shift hundreds of millions, but depends on political will. Net effect: meaningful relief/revenue tools—still far short of $3.9B in property taxes.

*All figures are approximate estimates for illustration, not official budget forecasts.

Even taken together, these measures would only cover a fraction of Maine’s $3.9 billion property tax system—but they point us toward something more realistic: relief and fairness without dismantling the foundation.

These options won’t abolish property taxes, but they can:

  • Relieve the burden on year-round Mainers.

  • Stabilize municipal budgets.

  • Make the system more equitable.

And alongside them, we need a renewed focus on budget discipline: making sure every tax dollar goes to essential services first—schools, public safety, infrastructure—before anything else.

The goal isn’t Taxationland or Vacationland. It’s building a Maine where government respects what families can afford, where everyone contributes in proportion to their means, and where every community—not just the wealthy coastal towns—can keep schools open, roads paved, and seniors secure in their homes.

The Real Work Ahead

It’s easy to cheer for ideas that promise something for nothing. But replacing property taxes with sales and tourist taxes doesn’t just fail the math test—it shifts the burden onto the very people it claims to help. Abolishing property taxes would mean $36 lobster rolls, $264 hotel rooms, $5.40 loaves of bread, and unstable town budgets. Meanwhile, wealthy non-resident homeowners would celebrate their most significant tax break in decades.

It’s tempting to look at New Hampshire, with no broad-based income or sales tax, or Wyoming, which ranks at the top of the Tax Foundation’s 2025 State Tax Competitiveness Index, and wish Maine could do the same. However, those models are built on very different economies and revenue sources that Maine simply lacks. The real conversation here isn’t about whether Maine should have property taxes at all. It’s about how to make them fairer, smarter, and less painful for the people who actually live here year-round—while also making sure government spends wisely.

In many towns, most of the tax bill already goes to schools, while roads crumble and those on fixed incomes struggle to keep up. Relief has to mean not just who pays, but also how the money gets used.

That’s the real work ahead: building a Maine that respects what families can afford, prioritizes essential services first, and ensures everyone contributes in proportion to their means.

dKay in Maine
Next

What Maine’s 2025 Referendum Question 1 Could Mean for Voting