Tax reform has historically been the most difficult policy to overhaul. It’s a lot like a middle school dance where everyone stands nervously on their side of the room. There’s lots of music, but no dancing. Tax policy is the place where progressive and conservative ideas about how to build an economy sincerely differ, and where people most impacted by the changes can be the most effective at stopping real reform. That said, we can all agree reform is long overdue.
Effective tax reform should help Mainers climb into the middle class, not push them out. It should make homeownership more affordable, not less. It should ask those who’ve made out well in this miserable economy to contribute more, while providing stable, adequate revenue to invest in quality public services like education and transportation. In short, we need a tax system that ensures everyone pays their fair share and everyone gets a fair shake.
First, we must stabilize our revenue sources. Maine’s sales tax is outdated and overly dependent on sales of cars and construction materials, which are the first things people stop spending money on in a recession. This results in wide swings in sales tax revenue because these two categories alone make up such a large percentage of taxable sales. Broadening the base of items that the sales tax applies to would create a more stable revenue stream and reduce the boom-and-bust budget cycles.
In 2009, Democrats put forth a tax reform proposal designed to do this while reducing the overall tax burden for middle- and working-class Mainers. While that package was defeated in a people’s veto, it was refreshing to see most of the Democratic proposals to stabilize revenues in — of all places — Republican Gov. Paul LePage’s budget. It’s clear conservatives and progressives understand the need to strategically remove sales tax exemptions to ensure we properly tax luxury items and that tourists contribute more to our tax base.
Here’s another example of how out of date our tax system is: the top income tax bracket kicks in at barely more than $30,000 in income. So someone who makes $30,000 rises into the same marginal tax bracket as someone who makes $300,000 per year. An efficient income tax would ask the wealthiest to pay their fair share while spreading out the current tax brackets, which would be a substantial tax cut for most Mainers.
I agree with the governor’s attempt to broaden the tax brackets. However, Maine Revenue Services released an analysis last week of his overall reform package, which clearly shows that Mainers making about $40,000 per year will earn a $145 tax reduction by 2019, while those making $400,000 will earn a $10,679 tax break. We should be working to ensure people pay their fair share, in accordance with what they can afford.
I also agree with the proposal to stop taxing income on military pensions. However, we must also be vigilant in protecting the Veterans Service Officer positions, as they help Maine’s military families navigate the red tape to get the military benefits they have earned, including pensions.
Lastly, I appreciate the governor’s proposal to double the Homestead Exemption for senior citizens, from the current $10,000 per year to $20,000. Unfortunately, he wants to raise property taxes on everyone else by eliminating the exemption for all homeowners under 65. Pitting senior citizens against everyone else is bad tax policy. The governor is right about doubling the Homestead Exemption to $20,000, but we should do that for everyone, not just those over 65.
While it may be easier to be drawn into the rhetoric and hunker down in individual corners, it is essential that we take this opportunity to reform our tax structure seriously. If the governor is willing to set aside his political rhetoric on taxes and the unnecessary attacks on the people working to protect the homeless and mentally ill residents of Portland, I would be happy to build on the common ground in his proposal and work with him to reform our tax structure. As a show of good faith, let me start by apologizing for my bill to sell the Blaine House.
Now, Gov. LePage — may I have this dance?
Democratic Rep. Diane Russell serves District 39 (Downtown Portland, Munjoy Hill and the Casco Bay Islands) in the Maine House. She served three terms on the Veterans and Legal Affairs Committee, and currently serves on the Taxation Committee.