Our Legislature is considering proposals to discard the 3 percent surtax on annual income over $200,000 that Maine voters approved in November. Rejecting the voters’ choice is a bad idea. Some have suggested that the tax will harm businesses, damage our economy, and turn away professionals who might move to Maine. These claims are simply not valid.
Occasionally life presents us with opportunities to perceive and internalize the reality that all of us spring from the same well; we are all of the same flesh and blood. Such an opportunity came to my father when he served in the European Theater of Operation during World War II. In fox holes, no one cares about your income, SAT scores, family heritage and so forth.
As that group of men and women, who came to be called “The Greatest Generation,” returned home from the war, they retained those life’s lessons that were formed in the Great Depression and refined through the furnace of affliction. They determined to build a society in which each person could prosper.
To insure a living wage, they set the minimum wage at today’s equivalent of around $21 per hour. To discourage inappropriate largesse among corporate CEOs and others, his generation also set the top federal income tax rate at 91 percent.
When I came out of grad school and began my successful career as an economist and hedge fund trader in 1980, the top tax rate stood at 70 percent. During those years, I was blessed beyond measure in my business. Whether tax rates went up or down, I gladly paid it. I felt myself fortunate to be in a position to pay the top tax rates.
I am saddened to hear some say Maine’s new tax rate is “punishing for success.” I hope that no one reading this would give voice to such a self-centered sentiment.
If you are among the 16,000 top taxpayers and feel that selfish idea arise in your heart, try giving a close friend of mine your income for a while and see how you manage working his two full-time jobs at $12 per hour. Your attitude will improve.
In 1996, my family and I considered moving to Maine from our beautiful home in Lake Forest, Illinois. Our chief concern was Maine’s special needs program since our son, Michael, is severely disabled. Illinois had a terrific program for him. Maine could provide something comparable, and Maine has taken great care of our beloved Michael.
It is the rare person who rejects Maine because of taxes. I suspect that the few who might make their final decision based on income tax rates would be unhappy in Maine. This is a place where we take care of each other. When the storm leaves us in the dark, we drag our backup generator down the road to the neighbor’s house to give him a few hours of power. That’s who we are. Paying the 3 percent surtax is taking care of each other.
One of the first lessons economists learn is that there is no free lunch. If we remove the 3 percent surtax, we will need to raise property taxes to ensure public education is funded.
Raising property taxes removes cash directly from household spending. In contrast, those in the upper echelons of the economic food chain who would pay the surtax have more financial resources. Consequently, they park more of their money in the bank. Maine businesses need spending. They need customers with some pocket change, not customers who have just lost their extra purchasing power through a property tax hike.
Maine survives and thrives by implementing good public policy. The 3 percent surtax is good policy.
Marcus Hutchins is a former economist for Merrill Lynch. He lives in Southport.