Sen. Linda Valentino, D-Saco, Senate chair of the Judiciary Committee that considered the bill, was livid after the vote, calling it “an insult” because the Senate ignored the committee’s recommendation. Maine Attorney General Janet Mills also opposes the version passed by the Senate.

AUGUSTA, Maine — Just hours after the House of Representatives overwhelmingly supported a bill that would have allowed local municipalities to vote on increasing sales taxes, the Senate soundly defeated the measure Wednesday afternoon.

LD 427, An Act to Authorize Options for Local Revenue Enhancement, written by Rep. Sharri MacDonald, R-Old Orchard, would have allowed towns and cities to hold local votes to decide if they wanted to increase the sales tax and keep the revenue from the increase. Maine currently charges a 5 percent state sales tax, which will increase temporarily to 5.5 percent on July 1 if a budget that won legislative approval last week is enacted.

The bill passed the House on a bipartisan vote of 101-48 but failed in the Senate with 31 voting for the “ought not to pass” motion and only four voting for the bill.

Debate on the measure pitted lawmakers from rural communities against those who represent more urban areas.

Sen. Linda Valentino, D-Saco, said she supported the bill because tourist towns such as MacDonald’s hometown of Old Orchard regularly collected large amounts of sales tax and often received only a small portion of that in return through the state’s revenue sharing program. Last year Old Orchard collected $75 million in sales tax but saw only $816,000 in revenue sharing from the state, Valentino said.

“That certainly is not fair,” she said.

The amount Old Orchard would get back this year will be even less under the Legislature’s budget, which reduces revenue sharing to cities and towns by about 40 percent.

The bill also included sunset provisions that would have allowed the state to see how many towns would actually enact local options in a short period.

Opponents argued that towns such as Freeport with huge retail businesses and mail-order giant L.L. Bean would have been able to gain giant windfalls on fairly small sales tax increases while others with little sales activity would be left short.

Valentino said the bill probably should have been amended to be applied to only meals and lodging.

“This was to help small communities that can grow to 10, even 50 times their size in the summer and help them out,” she said. “It was just a tool in the tool box.”

The bill’s sponsor, Sen. Linda Valentino, a Democrat from Saco, said securing funding for the bill was still one of her highest priorities and that efforts were underway to save the program.

“We really need legislative action to put more money into the program,” she said. “It’s been hugely successful and we feel this is an immediate stimulus to the Maine economy.”

Her bill would remove the lifetime cap, replacing it with an annual cap of $5 million in tax credits.

“We need to get ahead of this issue,” said Sen. Linda Valentino, D-Saco, noting that gambling and alcohol are addictive, but allowed and regulated in Maine. She argued that the question posed by LD 1229 would give legislators better control of rulemaking than a citizen initiative would.

Sen. Linda Valentino, a York Democrat, reiterated some of the logistical concerns she says the bill raises. "The law is certain to increase litigation, to burden the courts and to cast a cloud of uncertainty over future actions of the Legislature and state agencies, because of unclear processes and problematic exemptions," Valentino said.

The bill was sponsored by Sen. Linda Valentino, D-Saco, on behalf of Attorney General Janet Mills, also a Democrat. The Senate accepted the measure unanimously while the House passed it following a 78-59 roll call vote.