I am a lifelong Democrat voting yes to repeal LD 1495. The “tax reform” bill is a bewildering complexity that 1) abandons our progressive income tax structure, 2) ignores the property tax, 3) increases regressive sales taxes and 4) arbitrarily selects new services to be taxed.
The progressive income tax, like our federal income tax, is one whose tax rate increases with income. It is the bedrock principle of fair taxation and a perennial plank in the Democratic Party platform. It fairly and equitably assesses taxes based on a person’s ability to pay; lower when you are young and starting out, higher in your peak earning years, and lower again in retirement. A flat tax, by contrast, gets you at every stage of life.
The June 23, 2009, Wall Street Journal editorial touting the “Maine Miracle” also said that “the Legislature and Gov. John Baldacci broke with Obamanomics and enacted a sweeping tax reform that is almost, but not quite, a flat tax. The new law junks the state’s graduated income tax structure with a top rate of 8.5% and replaces it with a simple 6.5% flat rate tax on almost everyone …”
A better solution is to periodically adjust our progressive income tax for inflation, reducing rates for lower incomes and increasing them for higher incomes.
Property taxes represent almost one-third of Maine residents’ taxes. They have a poor relationship to income and ability to pay. They weigh most heavily on the elderly and those with lower incomes. An array of confusing and complicated “circuit breakers” tries unsuccessfully to make the property tax more equitable (The latest would allow 70-year-olds to defer their property taxes until, presumably, their job prospects improve or they win the lottery).
A better solution is a local-option income tax to supplement or replace the property tax, with an income tax credit for property taxes paid.
The bill shifts collections to the sales tax, hopefully from visitors who will pay higher meals and lodging taxes. There is no exception from the tax if you show your Maine driver’s license at McDonald’s or if your professional association holds a three-day gathering at a Maine conference center. Sales taxes are one of the most regressive taxes, disproportionately affecting lower-income groups.
A better solution is to increase the highway fuels tax in annual steps with an income tax credit for a baseline annual mileage. This has multiple advantages: promoting fuel economy, taxing visitors and affecting everyone impartially.
The bill adds new taxes on at least 100 selected services with 25 exceptions, specified by a lot of fine print. A sample of them:
— Miniature golf fees, but not golf course greens fees.
— Go-cart track fees, but not ski lift tickets.
— Repairs to your car, gun, piano and lawn tractor, but not to your boat.
— Diaper service, art restoration, ventriloquist services, and blimp(!) rides.
— A guided fishing trip on Moosehead, but not a whale-watching excursion from Bar Harbor.
— Computer repair, but not custom software.
— Boat engine maintenance, if it’s an outboard, but not an inboard.
The point is not that the list is right, wrong or ridiculous; it’s that there is no objective way to create it. Why do boat repairs merit an exemption when automobile and outboard motor repairs do not? If we are trying to export taxes to out-of-staters, why not tax some real property services, like landscaping? The bill is a lobbyist’s dream, our tax collector’s nightmare and an abysmal public policy.
LD 1495 has one good idea: the use of income tax credits to offset some of the regressive taxes paid by Maine residents, but it’s not enough to save a bad bill.
Adrian Humphreys resides in Hope, where he operates a custom software service. He is a Democratic candidate for District 22 in the state Senate.