Democrats push tax reform; GOP wary of shift
state house

Democrats push tax reform; GOP wary of shift


By Mal Leary
Capitol News Service

AUGUSTA, Maine — Democrats, including Gov. John Baldacci, want to reform Maine’s tax structure this session, but many Republicans and business leaders worry there will be more tax shifting — or tax shafting — than tax reform.

“Tax reform is an important goal for this legislative session,” Baldacci said in an interview. “I share the goal of reducing income taxes on Mainers as part of tax reform, but I am not certain of the best way to accomplish that.”

Baldacci said he has not seen any specific plan from lawmakers and will consider any plan that is proposed to accomplish his goal of lowering the income tax rates.

Democratic leaders of the Taxation Committee, however, think they have the solution. As they did two years ago, they want to expand what is covered by the sales tax and use that money to lower the income tax rate. They stress that any plan will be “revenue-neutral” and not add to the overall amount of taxes paid by Mainers.

“We know that our top income tax rate is too high and kicks in far too soon,” said Rep. Tom Watson, D-Bath, co-chairman of the Legislature’s Taxation Committee. “We also know our sales tax base is very narrow, and that makes it very volatile in a recession like we are having now.”

He said that while a reform plan has not been completed, it would be similar to one crafted two years ago that passed the House but failed in the Senate. It will propose extending the sales tax to items not now taxed, and may propose taxing some items at higher rates and using the revenue that is raised to lower the income tax rates.

“We learned our lesson last time,” said Sen. Joe Perry, D-Bangor, co-chairman of the Taxation Committee. “This is being carefully drafted and we are going to take the time to sell this to the Legislature and go on the road to convince Maine people it needs to be done. When you explain to people what it is we want to do, they like it.”

He said the more ambitious tax reform effort in 2007 failed because he and other supporters had not taken the time to explain the plan both to lawmakers and the public. He said that in the weeks and months ahead there would be a major effort to explain the final proposal to the public, as well as to lawmakers.

Watson said that while the plan is not complete, drafters have settled on the general philosophy of extending the sales tax to discretionary spending items such as movie tickets and ski lift tickets. He said some discretionary spending items now are taxed, but many are not.

“We want to export more of our taxes to visitors like others states are doing,” Perry said, “and use the money we generate to lower the tax burden on Mainers.”

But as the Democrats work on their plan, they are finding few takers among Republican lawmakers, including the co-sponsor of the effort two years ago, Sen. Richard Nass, R-Acton.

“The Republicans, so far, are not particularly interested,” Nass said. “We think the emphasis should be on reducing spending to reduce taxes.”

But Nass said he still believes there needs to be a reform package that takes the volatility from the sales tax by broadening the base. However, he said there is little, if any, GOP support for his position.

House GOP Leader Josh Tardy, R-Newport, said the only tax reform he believes will gain Republican support would be funded by cutting state spending, not by shifting tax burdens.

“We haven’t seen anything, so I will keep an open mind,” he said. “If reform is defined as raising a tax to lower a tax, I think it will be skeptically received by the Republican caucus.”

Tardy said it is his belief that true tax reform can be accomplished only by reducing taxes, not just shifting tax burdens.

Maine State Chamber of Commerce President Dana Connors expects some sort of tax reform effort will be pushed this session and shares the concern that shifting tax burdens is not a reform.

“If you are now being taxed, and you were not paying that tax before, you are going to see that development as a tax increase,” he said, “not tax reform.”

Perry said he is pushing to make sure the package lowers the tax burden of Mainers, both through lower income tax rates and in the mix of taxes they are paying. He said the modernization of the tax code would better position the state to recover from the recession.

“When we come out of this recession we will be positioned much stronger moving forward than if we stick our heads in the sand and just say make more cuts,” he said.

Democrats believe the increased majorities they have in both the House and Senate bolster the likelihood they can pass a measure this session.

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Comments
25 comments on this item

Now come on Baldacci if you lower income taxes then you are going to lower what the State of Maine takes in as taxes which you will have to cut even more programs and budgets. What the state needs to do is cut what it spends on the taxes it already takes in.

Oh for Christ sake... we know Democrats have no problem raising taxes ... we have all learned from Washington Cabinet appointments that they have no intention of paying them anyway. If Augusta cant reduce taxes just leave them the hell alone. All you are going to do make someone else take the burden. What a screwed up state.....

All the progressives know how to do is shift and shaft under the guise of "reform" so they can keep increasing taxes. Ensnaring thousands more people as conscripts to collect sales taxes for the state under the boot of more regulations and bureaucracy only torments small business even more while providing a foundation on which to impose even higher taxes in the next step.

This plan, which failed last year for many good reasons, is more of the same unethical and economically nonsensical "export taxes" mentality as Perry admits again. "Exports" means trading value for value; tax abuse cannot be "exported" -- which in this context can only mean declaring war on people who can't vote.

The dirty secret is that new and higher taxes claimed to "hit people from away" will be paid by local businesses dragged into the scheme as legally responsible for paying the tax because prices cannot be arbitrarily raised to "pass on" taxes or any other "cost", especially for discretionary vacation and entertainment.

This kind of protectionism in the form of "tariffs" obstructing free trade played a major role causing and extending the Great Depression of the 1920s and 1930s and is doing the same thing to the Maine economy now as business and investment shun the state. No one gains from this.

Shifting tax from income to sales tax might not be such a bad idea. Then you have those shafting the system by collecting welfare and working under the table, drug dealers, and people not reporting income paying taxes on the things they buy. There will never be a perfect solution.

I thought the dems considering paying taxes is Patriotic... unless you hold office or nominated to one!

they may lower income tax but they will just make up for it in another tax.they all ways do.shaft the little man give big bankers more money.buncha crooked @#$%^&*(

Maine lowering taxes of any kind? What a joke! This year we promise not to raise your income tax, but we have to raise fees on the interstate, fishing licenses auto, boat snowmobile registrations ect. but next time around we promise we will not raise these fees,but next time we might have to raise your income tax!!!!!!!!!!! Give me a BREAK! State Goverment has taxed most of our industry of of state---many have left the state looking for work and now one more stupid idea--- let's tax the out of state people who visit our state to the point that they stop comeing.----- IS THERE ANYONE IN AUGUSTA WITH A BRAIN???????

Here we go again... Time to call your elected rep and get your feelings known and hold them accountable...

Time for Joe Perry to be replaced. A tax is a tax, no matter how you dress it up. But don't worry, you know they will use scare tatics to get their way. They will say that police and firefighters jobs will be cut, or the roads won't be plowed.....what a bunch of crap! How about cleaning out the DOT, there's a waste of money. Enough is enough!

Joe Perry is a putz "people like taxes once you explain it to them?"

How about putting money for the hospitals in the State somewhere in the mix? Time for the free loans to Baldacci to end.

A tax shift is actually a good thing. Maine's tax structure needs work. Yes, I recognize that 90% of all the people that comment on Maine newspaper web sites complain about taxes being too high, but that aside, shifting some of the tax burden around isn't necessarily a bad thing - particularly if we can make out-of-staters pick up some of the tab like other states do.

Maine should apply the sales tax to EVERY PRODUCT and SERVICE sold in the state. The products that are exempt are the ones where the companies concerned have lobbied the legislature to remain untaxed. I say, good job Baldacci. I didn't think you had the sense to approach the budget in a fiscally fair manner. To all of you whiners about increased taxes: check your IQ and you'll find it deficient - sort of like our budget.

Shifting the tax burden to the sales tax is a bad idea, because it falls hardest on the shoulders of people with lower incomes, who can't afford it.

Tax reform? No .. the dems need to focus on "SPENDING REFORM".

why not stop foolng yourself about shifting taxes to people from away? if you want to do that charge them when they enter the state. something tells me you couldn't get away with it. i like your way of thinking? if it isn't legal give it another name"tax reform". grow up cut spending! gw sage

THATS IT I'M OUT OF HERE, SUNNY LAS VEGAS IS LOOKING GOOD AND NO TAXES EITHER!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Here watch what my left hand is doing so i can take the money i just gave you back out of you pocket again, i belive that is a fair way to look at their tax reform.

Shill Game that will be paid for disproportionately by those who earn the least. Those who earn their income by working under the table will only be slightly effected. Lower spending.

in the oldin days they use to run politicians out on a rail when they didn't perform up to what the people expected, i belive it is time for a trip to augusta

The only thing on here is negative stuff. Guess what folks as long as the party in power keep getting elected they get to determine policy. I would much better see the Democrats in control than the Republicans. The majority of people in Maine feel the same way or why else are Democrats still in power.

If the Republicans are in power we would all be working for minimum wage, have no healthcare, a prison in every town and nuclear missle silos in your driveway.

If all of you have sooooo little faith in democrats helping the economy, WHY THE HELL DO YOU KEEP ELECTING THE FOR?????

You up the sales tax and your income tax will go down! Wink, Wink, Wink! Yeah right! They'll both go up! Stop writing checks your a$$ can't cash! Joe Perry couldn't poor piss out a boot with instructions on the bottom!

This is in today's Portland Press Herald:

Lawmakers file 32 bond requests

State House:Among them are bills urging the state to borrow money to aid businesses and save hunting grounds.

Ain't they some smart in Augusta?

I think people who do not have children should be getting back the big returns, they don't use the schools, use extra gas running kids to games and various entertainment, use welfare and don't contribute to over population.

It really makes a person angry because they are discriminated against ,for not having kids, by paying higher taxes and then can't write off an deductions, mortage interest, medical and don't get back enough to pay the rent or car payment or buy medicines or get medical treatment.

Guess I'll have to cancel that one box of girl scout cookies I ordered and tell the child it's because I'm discriminated against by the government for not having kids.

Just as on the National level its very clear the Republicans and their fellow wackos as evidenced here intend to obstruct Maine and the National recovery.

First, reform should expand the sales tax base as has been proposed now for 20+ years. Second the reform should be revenue neutral. Third it should be revenue neutral in all income distribution groups. In other words the % of tax revenue collected from the bottom 10% of income earners should not change nor should it change for the top 10%. That would stabilize sales tax collections during business cycles. But after reform, the effective tax rate on the lowest 10% (including property, sales and income taxes) should be halved so that all income distribution groups are paying the same effective tax rate.

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