There is a plan before the state Legislature in Augusta that has met the approval of both political parties in one form or another in the past. It’s a plan that would strengthen Maine’s economy for the long term.
Why, then, you ask, would it not sail to passage? Politics, pure and simple. It’s a classic, Washington-style stalemate right here in Maine.
The plan I’m talking about is Gov. Paul LePage’s tax reform package. It would cut the income tax from 7.95 percent to 5.75 percent, cut taxes on pensions and businesses, eliminate the death tax, and boost property tax credits. It would compensate for this tax relief in part by eliminating special interest exemptions in the sales tax code and lifting the sales tax rate modestly from 5.5 to 6.5 percent.
The net effect? A $300 million per year tax cut for Mainers.
Maine has the ninth highest income tax in the country, but the 32nd highest sales tax, according to the Tax Foundation. That doesn’t make any sense for a heavily tourism-based economy like ours, which should let out-of-staters pay a larger share. Tourists don’t pay state income taxes, and apparently neither does former Gov. Ken Curtis, who signed Maine’s income tax into law in 1969 and now resides in Florida.
According to the Maine Office of Tourism, for overnight leisure stays, Maine has between 2.5 and four times the market share of New Hampshire, Vermont, or Rhode Island. Visitors spent $5.2 billion in Maine in 2013 — more than 10 percent of the state’s GDP. Yet Maine’s sales tax rate is the lowest in New England, save for New Hampshire.
Now, as a Republican, believe me, I don’t like advocating for the increase of any tax. But there has come a point where Maine’s overall tax system is just so out of whack that it demands these adjustments.
To give you an idea of just how high Maine’s income tax is, of the eight states with a higher top income tax rate than Maine’s, $68,000 is the lowest bracket at which their top rates start. Maine’s top rate starts at just $20,900. So one could make the argument that Maine effectively has the most burdensome income tax in the nation.
And that high income tax is holding us back, big time. Young people are more likely to change jobs than older workers, and those with college degrees are more likely to move from state to state. Those are the kinds of people we need to attract to Maine, and the income tax is a cost of living factor that’s within our control.
A bit of history is in order. Democrats in 2009 supported this concept of increasing the sales tax to reduce the income tax — yes, Democrats even gave “tax cuts to the rich.” Republicans did not support this plan, however, because it contained all sorts of special interest exemptions and didn’t provide a total net tax cut.
The governor’s plan lacks both of those faults, however, and Republicans should get on board this time around. Likewise, Democrats who supported their 2009 proposal have no real reason to object to the governor’s plan, besides a petty attempt to deny the governor a “win.”
I was a member of the “Gang of 11” in 2013 — a group of five Republicans, five Democrats, and one independent in the Legislature who put forward a plan similar to Gov. LePage’s current proposal.
There were things about that plan I didn’t like. There are things about the governor’s plan that I don’t like. But you know what’s worse than either? The status quo.
If we sit back and do nothing, we should expect the same poverty rates, the same lack of economic development, and the same low wages we have seen for decades since the income tax was created.
The famous classical Greek leader Pericles once wrote, “just because you do not take an interest in politics doesn’t mean politics won’t take an interest in you.” I am afraid the only thing that will force Democrats and Republicans in Augusta to come together and support job-creating tax reform is if you, their boss, call them up and tell them to.
The halls of the State House are flooded with lobbyists seeking to kill reform because it hurts their special interests. Don’t let their voices be the only ones your state representatives and senators hear.
Hon. Lance Harvell, a longtime millworker, represented Farmington in the Maine House of Representatives from 2009-2014.