After reading the Feb. 7 BDN OpEd by Rep. Peggy Rotundo, it is necessary to set the record straight on tax conformity and the business community once and for all.
Critics of permanent tax conformity imply that whatever policy decision takes place, it must give the best deal to Maine people. I would argue the tax conformity proposal as amended before the Maine Legislature does just that.
On Dec. 18, 2015, Congress passed and President Barack Obama signed the Protecting Americans from Tax Hikes Act, or PATH, expanding the current Section 179 deduction limits to $500,000 permanently and extending federal bonus depreciation through 2019. This was one of but a few successful bipartisan efforts to stimulate investment in the United States economy and to increase jobs.
Maine typically has in the past conformed to the federal government on Section 179 but has adopted its own version of bonus depreciation — a bipartisan version, I might add — called the Maine Capital Investment Credit. The partisan debate before the Maine Legislature is centered on a proposal to make permanent and increase Section 179 expensing limitations and whether to extend the Maine Capital Investment Credit out to 2019.
Various lawmakers imply we should concentrate our efforts on small business and characterize the Maine Capital Investment Credit as applying only to “large corporate filers from out of state.” The Maine State Chamber of Commerce strongly disagrees. This credit also applies to 4,000 Maine individual taxpayers — small- and medium-sized businesses — which are pass-through entities, such as limited liability corporations, partnerships and S-corporations. In fact, according to Maine Revenue Services, the majority of this credit goes to those types of taxpayers, not “out-of-state companies.” In truth, most are regular Maine taxpayers who own their own businesses.
Don’t be fooled by the bait-and-switch tactics of some in the legislature who are trying to confuse the issue of conformity and school funding. Last year, the Legislature increased state aid in the current two-year budget by $83 million over the previous two-year budget. That’s a huge increase. The $23 million in education funding that is being referred to by opponents is because of adjustments made after the Department of Education has the state appropriation flow through the school funding formula. Municipalities that are seeing a revenue decrease in aid would have had to experience an increase in valuation or a decrease in school population or both.
On the flip side, not mentioned by critics of conformity, several municipalities around the state are receiving more education funding dollars than previously because their valuation either went down or the student population increased. There are other factors in play that determine a municipality’s school subsidy, but you get the drift. Not all municipalities lost school subsidy — some gained subsidy. The point is, the school funding formula is working as legislators designed it to work. It may be worthy of a policy discussion but a separate discussion. It should have nothing to do with these efforts to bring about tax conformity, economic investment or efforts to create new jobs.
Tax conformity deserves careful consideration by Maine’s Legislature. Adoption of both Section 179 and the federal bonus deductions, or at least Maine’s version, is absolutely imperative to keep Maine businesses competitive.
We need to concentrate in this state on keeping all of our businesses competitive, not discriminating based on size. All our businesses are important and indirectly benefit each other to keep our economy strong. We need to foster tax policy that is certain, stable and predictable. We need to ensure that Maine businesses, regardless of size, have the tools necessary to continue to create jobs and to invest and grow their businesses.
Opponents of long-term conformity argue Maine needs to prioritize its needs. I would absolutely agree. We should not as a state draw a line in the sand and say we are going to pick winners and losers among Maine businesses. We should support all businesses — our economy depends upon it. Yes, we need to prioritize, but one would think a strong Maine economy and Maine jobs should be our No. 1 priority. Maine families depend on it.
Linda Caprara is a senior government affairs specialist for the Maine State Chamber of Commerce.