PORTLAND, Maine — Gov. Paul LePage took twice his allotted 15 minutes Thursday to make a case for his proposed budget and for shrinking and consolidating local government in a speech to about 750 real estate and local planning officials.
In what could have been a preview for LePage’s Feb. 3 State of the State address, he set out three top priorities — continued welfare reform, energy reform and tax reform — and ventured into a range of other topics, including education and law enforcement, most of which related to the governor’s view on a need for changes in the relationship between state and local government.
“In the south and midwest and Atlantic states, they’ve realized that you can regionalize some services and save a lot of money,” LePage said to the audience at the Maine Real Estate and Development Association’s annual forecasting conference. “I maintain that we need to start doing that.”
Many of those changes had examples in the governor’s proposed budget, which he said had been in the works for eight months — during his re-election campaign — and is a “first shot” at a state spending plan.
LePage said Thursday the plan to reduce the state’s income tax and make up for the difference with a higher sales tax rate and taxing new goods and services will prove the state could eventually cut its income tax to zero.
Real estate agents lobbied and advertised aggressively against a Democrat-initiated proposal to expand the sales tax base in 2009.
“I have the plans of putting in a constitutional amendment that says all real growth in the next biennial will go toward eliminating the income tax,” LePage said. “I believe Maine would be much better off without an income tax.”
At the same time, he’s proposed eliminating an estate tax and tax on pensions, which he said he said would help outstrip the allure of warmer weather and entice wealthy retirees to declare residency in Maine.
LePage said Thursday that his proposed tax code changes would raise the “national ranking” of Maine’s tax system from 33 to 23. His speech did not refer specifically to The Tax Foundation, which did the ranking. The organization, according to its website, was founded by business executives in 1937 who were concerned about government spending under President Franklin Roosevelt’s New Deal.
Other groups, like the Institute on Taxation and Economic Policy — whose advocacy arm the Center for Tax Justice has criticized the methodology of the Tax Foundation’s tax system rankings — provide a different perspective on tax system rankings.
ITEP’s 2015 “Inequality Index” looks only at how the tax system affects people making different incomes, comparing the percentage of pre-tax income the rich end up with after taxes to the post-taxation income of middle- and low-income people.
Maine had one of the most equitable tax codes in ITEP’s latest ranking released earlier this month, but some of the proposed changes — like the general shift from income tax to taxes on purchases — would raise Maine’s placement in that ranking (The Tax Foundation, firing back, has criticized ITEP’s ranking system).
LePage made the argument Thursday that the shift to consumption taxes would place more of the state’s tax burden on people visiting from out of state.
“We want them to pick up more of the burden of enjoying the beautiful state,” LePage said.
ITEP’s analysis of the state’s tax system indicates low-income Mainers pay a larger share of their income to sales tax than higher-income earners. The LePage tax plan includes a credit of up to $500 for low-income residents intended to account for that.
The tax shift is a major part of the budget, which also looks to eliminate by 2016 the state’s sharing of tax revenue with municipalities and let them tax half of the property value of certain large nonprofits to make up for that. LePage said Thursday that the Office of Policy and Management would issue a report in the next few days on that plan’s impact for cities and towns.
Records from Maine Revenue Services show that in 2013 about 145 municipalities had no such exempt properties from which they could get new revenue under the spending plan.
A Bangor Daily News analysis found towns with no exempt property stand to lose a collective $3.66 million in revenue sharing, with the towns of Waterboro, Glenburn, Milford, Chelsea and East Millinocket hit hardest.
That portion of the tax plan fits with LePage’s broader view that local governments provide too many services that could be consolidated, including road maintenance and law enforcement.
“I think we should have law enforcement at the county level and not necessarily at the local level,” LePage said.
LePage related that topic to his proposed cut of the budget for the Maine Forest Service, saying that the service’s request to be armed is out of concern that there are fewer and fewer fires that require their management or response.
The Maine Forest Service has said arming new officers is about safety and that the budget cuts are political payback for trying to get a bill passed during the last legislative session that would let them carry sidearms. LePage vetoed that bill.
All of those debates over the budget are sure to create battles in the Legislature this session, but LePage cited evidence he’s willing to work across the aisle by saying he met with Democrat John Martin of Eagle Lake, the longest-serving Maine legislator, earlier Thursday morning to discuss another proposed law to change the state’s mining regulations, an effort focused on Aroostook County’s Bald Mountain.
“I maintain we can have good-paying jobs and be good stewards of our land and we need to find that balance,” LePage said. “It’s a matter of working together and find that balance and he’s pushing for that in Aroostook County and I’m supporting it.”
Environmental groups have said opening mining on Bald Mountain would pollute nearby waters.
LePage said energy issues have been the “hardest work” his administration has done in the past four years and he expects that to continue.
He reiterated that natural gas pipeline expansion remains a priority and reaffirmed a stance that Maine needs to chip away at the price difference for gas between New England and states near the abundant Marcellus Shale, where hydraulic fracturing has unlocked domestic deposits of the fuel.
Despite criticizing leaders of Verso Paper Corp. for shuttering the Bucksport mill and selling it to a scrap metal company, telling them to “leave the state of Maine,” LePage said Verso was among the companies that had legitimate concerns about prices for heating fuel and electricity in New England making them less competitive internationally.
“We don’t have enough gas and we don’t have enough capacity during the winter months. And what has that done? Well, [the UPM Madison paper mill] is closed for three or four weeks,” LePage said.
The mill is not closing entirely but plans to cut back production for at least two weeks. In a letter to Maine’s congressional delegation, the mill’s manager Russ Drechsel wrote that energy costs and international competition, particularly from a mill in Port Hawkesbury, Nova Scotia, that gets subsidies from the Canadian government, drove the decision.
The Maine Public Utilities Commission is considering whether to add a new fee to electricity customers’ bills to help buy up to $1.5 billion in gas pipeline capacity over 20 years.
As New England shares a power grid, policymakers in all six states had considered a joint effort to create a tariff on electricity customers to pay for new gas capacity and possibly transmission projects that would bring more Canadian hydropower into the regional grid, but former Democratic Massachusetts Gov. Deval Patrick put that effort on hold, taking the state that consumes the most power in the region out of the discussion.
LePage’s chances at meeting his energy policy goals got a boost in November not only with his re-election but the victories of Republicans nationally and in Massachusetts, which elected Republican Gov. Charlie Baker.
U.S. Rep. Bruce Poliquin, representing Maine’s 2nd District, this week spoke on the floor of the House of Representatives in support of a bill passed to expedite federal permitting for natural gas pipelines.