On June 8, Maine residents will vote on Question 1, whether to repeal a tax overhaul passed last year by the Legislature. In June 2009, the bill was hurriedly passed along party lines in both the House and Senate during the final hours of the session. In the House, no Republicans voted for the bill, LD 1495 “An Act to Implement Tax Relief and Reform,” because the bill failed to offer real tax reform.

The bill attempts to provide income tax relief through an expansion of the sales tax to more than 100 services, including house cleaning, movie tickets and labor on car repairs. Recently, a local auto mechanic talked to me about the bill. He held up his grease-stained hands and said, “Jayne, I make my living with my hands, and now the state wants to tax my labor. Why? This does not seem fair.”

A petition drive organized by Republicans and Green Independents last summer collected more than 60,000 signatures to get a people’s veto on the ballot this June.

Supporters of the bill claim it will cut the top income tax rate from 8.5 percent to 6.5 percent. However, I believe this proposed “reform” comes with a price that unfairly raises taxes for thousands of Maine families, seniors and small-business owners. (Note: In my analysis, I have also drawn on the independent review of Mr. Arthur DiMillo of South Portland, who is a retired certified public accountant and former director of taxation at Raytheon Co. and Bath Iron Works. His Web site is mainedemocratstaxreform.org.)

Will the new tax code save you money? Please read the following and make your own decision:

1. Under “old” Maine law, there were five marginal tax rates: 0 percent, 2 percent, 4.5 percent, 7 percent and 8.5 percent. The impact of these progressive rates is that more than 75 percent of Mainers have an effective state tax rate of 3 percent or less. In 2007, the effective rate for all Mainers was 3.2 percent. The new law wipes out these progressive rates and imposes a flat rate of 6.5 percent.

2. If you itemize on your tax returns, LD 1495 eliminates several deductions, including: home mortgage interest, property taxes, charitable contributions and medical expenses. The new code will replace those deductions — and the standard deduction — with a limited tax credit that starts phasing out with incomes over $28,000 for singles and $55,000 for married couples. Using this approach, an estimated 82,000 taxpayers will see an average net tax increase of $446 and 29,000 taxpayers will see their taxes rise by more than $1,000 a year.

3. Proponents claim the bill “exports” taxes to out-of-state tourists by raising the sales tax rate on meals and lodging from 7 percent to 8.5 percent, an increase of 21 percent. However, the Maine Revenue Service estimates that Maine residents pay 71 percent of meals taxes. Additionally, I have spoken to local lodging businesses and some report that as much as 60 percent of their customers already live in Maine. Thus, it appears Mainers will pay the lion’s share of this tax increase.

4. An estimated 300,000 low-income Mainers do not file an income tax return. However, they will face the same new sales taxes as higher-income residents, making Maine’s tax code more regressive. To offset the tax increase, they may file with the MRS to obtain a $50 credit. Thus, for $50, the new law adds a whole new filing process for 300,000 Maine people.

5. Proponents claim small-business owners will be enticed to relocate to Maine. However, an estimated 65,000 small businesses that do not collect sales tax will now have to calculate, collect and remit sales taxes to the state of Maine. Does anyone realistically think this will lure businesspeople to Vacationland?

6. LD 1495 taxes nonresidents differently than residents by not allowing them to use the household tax credit. MRS calculates that the new law will bring in an additional $15 million. However, the law may be found unconstitutional. With this uncertainty, the projected revenue should not be included in MRS budget forecasts.

7. Every year, Maine income tax tables are adjusted for inflation. LD 1495 freezes this inflation indexing until 2014. What does that mean? It means Maine people will pay more income taxes until the indexing is reinstated.

8. Finally, the fiscal note for the bill includes hiring 12 new MRS employees to process and collect the new taxes at an annual cost to Maine taxpayers of approximately $1 million per year.

As a legislator, I support lower taxes for Maine people. However, I cannot support LD 1495 because the reform will help some while hurting others. I encourage a “yes” vote in June on Question 1 to repeal the law, then let the next Legislature work on a much fairer version of tax reform.

Rep. Jayne Crosby Giles, R-Belfast, is the ranking Republican on the Business, Research and Economic Development Committee.