A Historic Session
6/16/09 | 10 comments
editorial

A Historic Session


In recent weeks, lawmakers have cut state spending by $500 million and lowered the state’s income tax rate, both longtime goals of business advocates. So what has the response been? Complaints from the Republican party and some businesses that the tax reform legislation passed late last week is the wrong fix at the wrong time. The state GOP is working to organize a repeal.

Instead of trying to undo this historic work on taxes and spending, this legislative session should be remembered for its historic successes in the face of extreme financial difficulties. The 124th Legislature was marked by unprecedented cooperation from both parties in writing a budget that, for the first time in memory, decreased state spending. Lawmakers passed important legislation updating the state’s energy policy and made Maine a leader in civil rights by enacting a law to allow gay marriage.

And, after years of talk and study, lawmakers passed legislation to lower the state’s top income tax rate and broaden the sales tax base, two long overdue changes that will save Maine families and businesses money while bringing more predictability to state revenues.

Only one Republican, Sen. Peter Mills, voted for the revised tax reform measure. Republicans instead backed legislation that would use surplus state revenues to reduce the income tax rate. With budget surpluses likely years away, due to the national recession, this amounts to forcing Maine businesses and families to keep waiting for lower tax rates.

Rather than wait, the House and Senate passed LD 1495 late Thursday. It extends the state’s sales tax to new goods and services and raises the meals and lodging tax. But, most important, it drops the top income tax rate from 8.5 percent to 6.5 percent for most taxpayers. Annual income over $250,000 will be taxed at 6.85 percent.

As important as the actual decrease is the message it sends. The Maine State Chamber of Commerce and other groups have long decried Maine’s tax burden as the highest in the nation. Although this was never true (it turns out that the Tax Foundation miscalculated Maine’s burden before correcting it last year), Maine’s income tax rate has long been too high.

At the same time, state spending needed to brought in line with revenues. Gov. Baldacci has addressed this on several fronts, from efforts to shrink government bureaucracy to reducing state employment, culminating in a budget for the next two years that cuts spending by more than $500 million. This work needs to continue, especially as federal stimulus money was used in many areas to balance the budget. That money is short-term, so additional changes need to be made to Maine’s government and the services it provides to further lower spending.

The need for such work, however, does not negate the importance of tax reform that meets the twin goals of lowering income taxes and creating a more stable tax base. Undoing the tax changes will shortchange Maine families and businesses.

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Comments
10 comments on this item
On 6/15/09 at 9:03 PM, boogyman wrote:         Repeated separate thumbs down will cause comment to be hidden

"This work needs to continue, especially as federal stimulus money was used in many areas to balance the budget" Funny, I thought it was meant to "save or create 3 million (or was it four million or was it two million) jobs. Well the unemployment rate is 20% higher than promised (oh wait, that was just a "guess" according to Joe Biden) maybe this is some of the money that was "wasted" that Biden told us about last week.

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On 6/15/09 at 11:11 PM, taxedtodeath1 wrote: Click here to view hidden comment         Repeated separate thumbs down will cause comment to be hidden
On 6/16/09 at 10:22 AM, mAineAc wrote: Click here to view hidden comment         Repeated separate thumbs down will cause comment to be hidden
On 6/16/09 at 10:58 AM, JonAlbrecht wrote:         Repeated separate thumbs down will cause comment to be hidden

mAineAc,

Not true. Apparently you've gotten a hold of some bad Republican disinformation. 579,000 Mainers will get a tax cut from this legislation. The lowest brackets got new tax credits which will more than compensate for the increased sales taxes paid. $75,000,000 will be paid by out-of-staters that are now paid by Mainers. I know the Republican party can't count and continues to misrepresent economics in order to make their rich friends richer which must explain their opposition to a revenue neutral tax plan that stabilizes state revenue through the business cycle and cuts taxs on all but a very few Mainers.

Given the burdens this was a historic session. Good job well done.

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On 6/16/09 at 3:38 PM, mAineAc wrote:         Repeated separate thumbs down will cause comment to be hidden

From the state website wording on ld1088:

"Part A makes fundamental changes to simplify and reduce the burden of the State's income tax and create an income tax that is intended to be more beneficial to investment and economic growth in the State. The current structure of 4 tax brackets, personal exemptions and deductions is replaced by a flat rate of 6.5% on all taxable income."

That is higher than all of the other tax brackets except for the highest. A household credit that does not explicitly say how much can not be counted as any benefit.

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On 6/16/09 at 4:48 PM, boogyman wrote:         Repeated separate thumbs down will cause comment to be hidden

JonAlbrecht wrote: "Given the burdens this was a historic session. Good job well done."

Give me a break, The burdens would not have been so great had it not been for the Democrat heavy Legislature having over the past 40 years driven this State into the ground.

The revenue projections from "$75,000,000 will be paid by out-of-staters that are now paid by Mainers." Will never materialize. Guaranteed.

And your dumb statement on republicans wanting to make their rich friends richer is just that, a dumb statement. The repuplicans I know in the Maine are small business owners, mostly successful, but hardly what I would call rich. They have a little knowledge of how to get things done and manage costs, otherwise they would not have survived in this state with all of its rediculous regulations and pocket picking.

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On 6/16/09 at 6:37 PM, gw2kpro wrote:         Repeated separate thumbs down will cause comment to be hidden

My taxes are going up because they did away with just about all deductions for anyone who currently pays taxes. Home mortgage interest is no longer a deduction.

So my tax rate went from 8.5% to 6.5% and my overall tax burden went up about a grand.

Yay for the tax cut.

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On 6/16/09 at 6:39 PM, gw2kpro wrote:         Repeated separate thumbs down will cause comment to be hidden

Of course, this type of info is not included in the editorial

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On 6/16/09 at 11:52 PM, FrankC wrote:         Repeated separate thumbs down will cause comment to be hidden

Do you - BDN editors - EVER have anything critical to say about the democrats in Augusta?

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On 6/19/09 at 3:29 PM, pokerface wrote:         Repeated separate thumbs down will cause comment to be hidden

ok they cut money but from where education, health care, and other important areas but I bet they still have nice fat pay checks our roads need repair. and they passed a gay rights bill which they have people fighting on. there goes more money. when do the people get to choose to raise and lower taxes and what the money gets used for. most of us are tired of paying people to mess things up for us and make choices for us. yay we vote things pass or they don't, the goverment needs to be restructured to really be forr the people and by the people, not just those with the money

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