AUGUSTA, Maine — Democrats on the Legislature’s Appropriations Committee said Friday that tax cuts approved last year have inflated the size of the state’s structural budget gap, while Republicans defended the reductions as smart policy that reduces the tax burden on Maine residents and stimulates the economy.
The pre-election debate over the merits of tax cuts lawmakers approved last year as part of the state’s current two-year budget played itself out during a presentation of Maine’s latest structural gap analysis by the state’s budget bureau.
The structural gap analysis — which was released late last month and is required every two years by law — projects that state spending will exceed revenue by $756 million over the course of the next two-year budget cycle if spending essentially continues at current levels, the state meets all spending obligations required by law, and revenues match projections made in April.
During Friday’s presentation, Democratic Rep. David Webster of Freeport pressed Finance Commissioner Sawin Millett to say how large the structural gap would have been without the tax cuts passed as part of the budget. Millett said it wasn’t a matter of simple math to recalculate the structural gap.
“If we’re going to engage in partisan banter over whether higher-income or lower-income [residents] benefited from tax cuts that you voted for, then I don’t think it would be a productive discussion for me to continue with,” Millett said.
Democrats hoping to recapture control of one or both chambers of the state Legislature have been hitting the tax cut theme hard on the campaign trail this fall, accusing the Republicans in charge of approving a slate of tax cuts designed to benefit the state’s wealthiest residents.
Republicans are quick to point out that most Democrats voted in favor of the budget that included the tax cut package. They also point out that the structural gap was larger, $1.17 billion, two years ago.
“Just because we vote for something doesn’t mean we don’t necessarily have concerns about it,” said Webster, who isn’t running for re-election due to term limits. “The premise was that the cuts were going to stimulate the economy in a way that they would be paid for. I am not confident that’s a route we’re currently on.”
The tax cuts in the two-year budget lower the top income tax rate to 7.95 percent from 8.5 percent starting Jan. 1, 2013, and create two tax rates, down from the current four. The cuts also exempt some of the lowest income earners from paying state income tax, raising the amount of an individual’s post-deduction income exempt from tax to $5,000 from zero.
Millett said last month that the state will forego about $342 million in individual income tax collections during the two years covered by the next budget as a result of the tax cuts. But “to paint this as an unfunded loss of revenue never to be returned, I think, is disingenuous,” Millett said.
Millett has said the primary drivers behind the $756 million structural gap are the fact that the gap reflects an assumption that the state will meet its requirement to pay 55 percent of public education costs, a measure required by a 2004 ballot initiative that has never been realized. If education funding continues at current levels, a document explaining the structural gap notes that the gap falls to about $503 million.
The structural gap figure also assumes continued growth in Medicaid costs and that the state will restore the portion of revenue it shares with municipalities to the legally required 5 percent of sales and income tax collections, another unlikely scenario.
“To say the structural gap is being caused primarily by education and health and human services and not by a tax cut from the Legislature is unfair to the people of Maine,” said Rep. Peggy Rotundo of Lewiston, the Appropriations Committee’s ranking Democrat. “There are choices that have increased the structural gap this time around.”
But Republicans said the tax cuts were needed to stimulate economic growth.
“It’s difficult to have an Appropriations Committee meeting 17 days before an election day,” said Sen. Roger Katz, R-Augusta. “A tax cut that removes the 70,000 lowest wage earners from any responsibility to pay taxes is not a tax cut for the wealthy.”
Millett said the true effect of the tax cuts on Maine’s economy and state budget won’t be known for a few years.
“It’s really a debate that could be ongoing,” he said.
Tax cuts don’t stimulate the economy because the other side of the equation is spending!
Government Spending accounts for about a third of the GDP and when you cut it it stagnates the economy even further!
Fairy Tale Economics is what the Republicans are pedaling for nothing more than to put money in their constituencies pocket!
Edit; The Bonus is People think that they got a Tax Break so they continue to vote for the Miscreants!
And to think, some phyicists say that a perpetual motion machine won’t work!!!!
LOL
Government spending doesn’t stimulate the economy, it misallocates resources. You have to look no further than Obama’s green jobs to see the result of government trying to pick winners and losers. I suppose if you’re the beneficiary of misallocated government largess then you would think government spending stimulates the economy. If you are the one being fleeced to pay for Solyndra then not so much.
Even a Dairy Farmer Knows that is you feed the Bull “ALL” the Corn because he is the “Cow Creator”,
You end up with a Fat Bull and NO Milk!
Actually most of the people of Maine are pretty smart about whether or not they got a Tax Break. They overturned LD1495 passed by the Democrats (and one Republican) that by it’s third year gave the top 1% a $34.5 million tax cut while the remaining 99% got a tax increase of $3.5 million. Their 2% cut in the top rate benefiting the wealthy dwarfed the current .55% and the current bill cuts taxes for all who pay income taxes without a gimmick that takes it back in future years. The Democrats seem to have a short memory.
Time for Tea Party Republicans to go.
Republicans are such liars! They are trying to feed Mainer’s a line of bull to pursue their agenda of filling the pockets of the rich. What tax break? I never felt one. I am a small business owner… and I am struggling. I have left the Republican party and plan to vote for Democrats! I hope you are wise enough to join me.. check the facts!
Perhaps you are not paying attention. I also expect you have never been a Republican.
Perhaps you are the one not paying attention. I also “suspect” (not “expect”) you have never tried living in the real world.
I’m afraid as an employer I live in the real world more often than you.
If you want to challenge liberal ideas, give us some arguments, references or links.
Did you know that Clinton let office with a balance budget, no deficit, and after reducing the national debt. And he did it by taxing big corporations:
http://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/
http://www.politifact.com/truth-o-meter/statements/2010/sep/23/bill-clinton/bill-clinton-says-his-administration-paid-down-deb/
It’s very mean and naughty of you to say that the poster who says Republicans are such liars and that he himself was once a Republican, is not telling the truth.
I tire of people who claim prior allegiance to another political party as if that makes their opinion worth more. It doesn’t.
I doubt that you’ve seen any one of these people assert that their opinion is worth more than anyone else.
Your post doesn’t add anything substantive to the discussion. Arguments. References. Links. All it does is cast accusations you can’t support and even you admit are uncertain. It makes Republicans, and all those who challenge liberal ideas, look weak.
I suggest you step up your game. Did you know, for instance, that the happiest countries in the world, according to Forbes Magazine, all have taxes to pay for strong welfare nets:
[The happiest countries] are all borderline socialist states, with generous welfare benefits and lots of redistribution of wealth.
http://www.forbes.com/2011/01/19/norway-denmark-finland-business-washington-world-happiest-countries_print.html
Repeating tired worn out links with old worn out opinions doesn’t add anything either. Besides the poster in question also provided no data. Opinion is what it is. That posters, mine, yours.
You’ve got my attention, Cheesecakes.
So, just one question:
Why haven’t the mythical “job creators” ended low employment in America with all their cuts for the wealthy, yet ?
That is the test for how the conservative economic theory works.
It the cornerstone of the trickle down economic theory.
So where are all of those jobs ?
Doing the same thing over and over expecting different results, is insane, and it does NOT create jobs, just structural budget shortfalls.
Tax breaks are all well and good and can effect the economy in a positive way provided other factors are not in play. Right now we have three factors dragging down the economy in my opinion. 1) High Energy Prices 2) Low housing Values 3) Government regulation particularly as it effects small business. The President can effect all three but for political reasons chooses not to.
The fact that our tax burden is higher than most other countries puts us at a competitive disadvantage…. but that is an argument that needs to take second place, IMO, to those other three factors.
… but not structure revenue short falls, in creasing deficit spendinng on every government level ?
Cheesecakes if ” Tax breaks are all well and good and can effect the economy in a positive way” … why haven’t the mythical “job creators” ended low employment in America with all their cuts for the wealthy, yet ?
That is the test for how the conservative economic theory works.
It the cornerstone of the trickle down economic theory.
So where are all of those jobs ?
If you can’t have things two ways at once once, you have nothing, politically speaking.
I’m very sorry to have to says, given that you have nothing, it makes it very hard to respect your comments, and worse the very policies that you can’t promote or defend logically.
You are a liberal’s bad .. or equally valid, I suppose, a liberal’s good example of all that is wrong with the no compromise, faith based, anti-science right wing.
But I do support your freedom to express yourself and try to influence the coming election.
In fact, I encourage you to keep up the usual quality of your very informative comments, given that I do so sincerely approve of how they might effect undecided voters, thank you, very much.
Matt, you didn’t understand what I said.
BTW high taxes guarantees high unemployment, at least in this environment.
I understand you are parroting the red half of the equation, but not the whole picture.
Balance the equation.
Because only economy growth which depends on jobs floating EVERYONES boat will prevent the tax burden from shifting to towns and the working middle class property taxes.
That has ALREADY been the result of the failed conservative economic theory.
.
> Thomaston tax rate rises 5 percent
By Stephen Betts on Oct. 03, 2012, at 2:25 p.m.
> Midcoast towns see sharp increase in liens due to delinquent property taxes
By Stephen Betts on Sept. 19, 2012, at 2:12 p.m.
> If legislators wanted to promote economic equality, they should have cut property taxes
By Albert A. DiMillo Jr. on Sept. 19, 2012, at 11:54 a.m.
>Dover-Foxcroft board sets mill rate at $17.15
By Stuart Hedstrom, Piscataquis Observer on Aug. 02, 2012, at 2:13 p.m.
> Bangor budget would increase property taxes by 2.3 percent
By Andrew Neff on June 21, 2012, at 6:57 p.m.
So just answer the question ;
WHY haven’t the mythical “job creators” ended low employment in America with all their cuts for the wealthy, yet ?
If unemployment is the problem, where is the no compromise, trickle down, conservative solutions besides more tax cuts (like no capital gains and interest income tax for the working middle class) and the the mythical “job creators ” creating mythical jobs.
You can’t have it two ways at once .
It is the only conservative solution.
It has not worked yet.
Why should what has fail so spectacularly as to threaten the whole capitalistic system.
I do believe there is not much attention grabbing here from anyone. depnfree said he was dumping the republican party and going democrat. The problem is, if our legislators don’t get their heads out of where the sun don’t shine, you my friend and the rest of us will be neck deep in dodo. Not being able to work with one another, the governments of the States will sink us. And with the federal government at an all time hate fest for each other its sure to turn this bridge to no where into circles. Unless we start paying attention to the better of all, we will slide into the biggest sinkhole with no return. Greece here we come.
“The tax cuts in the two-year budget lower the top income tax rate to 7.95 percent from 8.5 percent starting Jan. 1, 2013, and create two tax rates, down from the current four. The cuts also exempt some of the lowest income earners from paying state income tax, raising the amount of an individual’s post-deduction income exempt from tax to $5,000 from zero.”
Maybe that Jan. 1, 2013 has something to do with your feelings?
Why are leftists obsessed with stealing other peoples money? They think everyone is so stupid and can’t possibly survive without their great big hearts.
Good Gawd, man, you cannot be serious. Where were you when LePage opened the door for his big business special interest cronies to come in and make a fast buck, then laugh all the way to the bank? He’s still at it, in case you haven’t noticed.
Which cronies are you talking about and what fast buck are they making?
Let’s start here:
http://www.iwatchnews.org/2011/10/06/6883/analysis-health-insurers-win-big-maine
http://thetippingpoint.bangordailynews.com/2012/09/11/state-politics/corporate-influence-and-political-payback/
I’m sorry , I was distracted by all the information about the democrat turned independant named King. Seems he’s done a great job at taxing the Maine taxpayer only to line his pockets with windmill money.
Hey Republicans. Apparently you think we Mainers have short memories and have forgotten all the havoc and destruction your ideas have caused this state.
News flash…we haven’t forgotten, as you will see on November 6. The voter, if you don’t recall, always has the final word.
The word you need to remember, Republicans, is “backlash.”
Reclaim Maine Vote Democrat 2012
And don’t forget the path to destruction your pal Baldacci brought us down ! Don’t vote for a political party, take a look at the candidate and elect the one that lies the least ! It’s time to break the 2 party gridlock. Also consider voting out all encombants this year.
It’s exciting to anticipate that the liberal communists who post here will endure weeping and gnashing of their rotting dentures when Obama is fired for incompetence and duplicity by the American public! And even better! how they will scream bloody murder when the sodomites and their liberal enablers are instructed in a resounding peal to take their brand of perversion and resign it to the darkest recesses of Hades. Meanwhile… let them find encouragement on MSLSD and other failing media outlets who spew manure and “stuff” from the derrieres of prevaricators like Mr. Ed and Comrade Chris.
ROMNEY / RYAN 2012 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
AMEN !!!!!!!!!!!
So you joined The Myans, and many other Ancient Civilizations that predicted the coming cataclysm in 2012?