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Nick Murray is a policy analyst at the Maine Policy Institute.
Maine is finally recovering from COVID-19. Economic activity has reached 90 percent of pre-pandemic levels. Unemployment stands at 4.8 percent, well below the national average. And businesses are creating jobs at an encouraging rate.
Unfortunately, the infrastructure bill taking shape in Washington could bring this fledgling recovery to a screeching halt. President Joe Biden has released a $2.3 trillion “infrastructure” package.
The plan includes some worthy projects and initiatives, but much of this stimulus would be funded with an enormous tax hike that would likely dampen our recovery and, frankly, I believe Mainers simply can’t afford it.
Imposing new financial burdens on Maine’s businesses and workers at this pivotal moment would likely undermine the “build back better” goal the president wants to achieve.
Without a doubt, the economic impact of COVID-19 has been devastating for our state’s economy, especially for Main Street. During the height of the lockdowns, 55 percent of Maine’s small businesses had to temporarily shut down, according to a Maine Small Business Development Centers survey, and hundreds closed their doors forever. According to the same survey, their monthly revenues dropped by more than a third on average and one in five were forced to lay off workers.
Thankfully, the darkest days of Maine’s COVID-19 recession are behind us. Due in large part to our state’s aggressive vaccination efforts, many of the businesses most harmed by the pandemic are opening their doors once again.
More encouraging still, tourism — a core state industry — looks poised for a comeback. In one recent survey, 69 percent of the state’s businesses are confident that 2021 will see far more tourism than 2020. A separate poll of small businesses found that 92 percent now expect to survive the next year.
Of course, full-scale recovery is far from guaranteed. Whether or not Maine’s economy roars back in 2021 will depend a great deal on the decisions of Washington policymakers and how those policies affect mom-and-pop shops struggling to survive.
Imagine running a business that has skirted bankruptcy this past year only to find you must soon pay a crushing new set of taxes. Is this really the way to “build back better”? Raising the corporate tax rate from 21 to 28 percent could actually hinder our country’s ability to finance Biden’s historic spending spree.
The last thing workers and businesses need right now is higher taxes, regardless of what form those tax increases take. Now, just as those financial burdens are lifting, the Biden proposal would bring a whole new post-COVID set of economic challenges for workers and businesses.
The tax hikes the president is proposing would eat up revenues for countless Maine companies, from large corporations to small firms. They would depress hiring and wage growth, and prevent companies from purchasing equipment and renovating facilities — investments that support and create jobs.
At this critical moment, we should be lowering taxes, not ramping up financial burdens on struggling operations.
Look at the effectiveness of the 2017 tax reforms, which cut the top corporate tax rate from one of the highest in the developed world to 21 percent. Unemployment fell to historic lows around the country, poverty rates ticked downward, and Americans found themselves with more disposable income.
It’s now up to our leaders — especially Sens. Susan Collins and Angus King — to recognize that the Biden Administration’s proposed tax increases are likely to undermine our state’s economic revival, and for them to protect Maine’s workers and businesses from this misguided policy.
There’s no doubt that America’s infrastructure needs an upgrade. But that investment shouldn’t come at the expense of economic recovery, whether here in Maine or anywhere else in the nation. If the Biden Administration moves forward with tax increases, Maine’s economic future likely won’t look so bright after all.