AUGUSTA — Under tax reform, the state income tax rate is being cut and income taxes reduced for about 95 percent of resident taxpayers. To make up some of the lost revenue, the sales tax is being extended to additional goods and services.

People are now spending much more on services. Tax reform recognizes that change and taxes more services to keep revenue relatively stable.

Maine residents, overall, will see an estimated $53 million tax cut because out-of-staters will pay more during their visits here. Overall, tax reform is designed to be revenue-neutral, meaning the changes, on average, aren’t intended to raise more money.

The legislation, which is being challenged by petition, will go into effect if voters say “no” June 8 on Question 1, as we believe they should. For tax reform has benefits for families and children that go well beyond the facts outlined above.

One of the important features of tax reform is that it will improve the Maine Earned Income Tax Credit (EITC). Enacted at the federal level under President Ronald Reagan, and expanded under President Bill Clinton, the EITC has become a vital part of our efforts to make work pay for everyone.

The EITC was expanded again under the federal recovery act last year, and is playing an important role in protecting families from greater losses of income during the recession.

The EITC recognizes that many low-wage workers who make too little to pay federal and state income taxes nevertheless pay a greater portion of their wages than higher income workers in payroll taxes for Social Security and Medicare.

To recognize this contribution, the EITC has been made refundable, so families can get a check when they file an income tax return.

Maine has enacted a modest EITC for its state income tax, and the tax reform bill would make it refundable up to $150 for couples and $125 for individuals.

While the amounts involved are fairly small, when added to the federal benefits they can be significant for working families – particularly at a time when poverty rates, in Maine and almost every other state, are rising.

Another important, but little noticed, change in the tax reform will integrate the Maine Resident Property Tax and Rent Refund Program, better known as the “circuit breaker,” into state income tax filings.

The circuit breaker program operates on a simple principle — that residents shouldn’t have to pay more than a set percentage of their income, currently 4 percent, in property taxes or the equivalent in rent. If they do, they get a partial rebate from the state.

In various forms, the program has been around since the 1980s, but it has never reached as many people as it’s designed to help.

Even now, less than 50 percent of those eligible for this property tax relief actually get it. That may be in large part because it requires a separate application that can be intimidating for those not familiar with the program. This may be particularly true for those who rent, and may not even realize they’re eligible.

Under tax reform, the circuit breaker application will be simplified and included on the income tax form. Anyone who files, or has their taxes prepared for them, will have an easier time getting the relief that’s due them.

These aspects of tax reform make the system not only more efficient, but friendlier for parents and their children. We believe they are significant improvements over the status quo.

They provide more good reasons to vote for tax reform, by voting “no” on Question 1.

 

– Special to the Press Herald