AUGUSTA – All 11 candidates running in the gubernatorial primary agree on one thing: Taxes are too high in Maine.
How to reduce them — and whether to pledge never to raise them — is where the seven Republicans and four Democrats part ways, sometimes even within their own parties.
The tax issue, which has plagued governors for decades, has taken on a new life this election cycle, with voters scheduled to decide June 8 whether to repeal a tax reform plan passed by the Legislature last year.
It was a party-line vote, save for one Republican: Sen. Peter Mills, R-Cornville, who’s competing for his party’s gubernatorial nomination.
The new law lowers the top income tax rate from 8.5 percent to 6.5 percent, expands the 5 percent sales tax to more than 100 services and increases the meals and lodging tax from 7 to 8.5 percent.
The plan is revenue neutral, which means it neither adds to nor subtracts from state coffers. The loss of revenue to the state from the cut in the income tax would be offset by the new sales taxes and increased meals and lodging taxes.
The overhaul is an attempt to stabilize state revenue while reducing the income tax for most Mainers, supporters say.
Opponents say the expanded sales tax will hurt low-income Mainers who need to pay for services the sales tax will now apply to, such as car repairs. Also, some small businesses will now, for the first time, have to collect the sales tax.
The business community is split on the issue — the Maine Merchants Association opposes it and the Maine State Chamber of Commerce supports it.
Regardless of the outcome, the next governor will need to address taxes in a meaningful way — either by overseeing implementation of the law, or by finding another solution to ease the burden on Maine residents and businesses.
Below, where the candidates stand on the ballot question and other tax issues.
REPUBLICAN STEVE ABBOTT
He favors repeal but wants to lower the income tax
Abbott supports the tax reform repeal, although he recognizes the need to reduce the income tax.
However, he opposes the expansion of the sales tax to more services.
He said the law passed by Democrats expands the sales tax to areas he doesn’t think working Mainers can afford, such as auto and appliance repairs.
Another way to bring in revenue is to get more people back to work, he said.
“We don’t have enough taxpayers in the state,” he said.
Abbott, former chief of staff for U.S. Sen. Susan Collins, has not taken a no-new-taxes pledge, which he sees as a gimmick advanced by certain special interest groups.
But that doesn’t mean he wants to raise taxes.
He believes that by cutting spending — getting rid of Dirigo Health and reducing the number of state workers — the state can reduce the need for revenue.
From his perspective, the property tax is the most onerous burden on Maine people. As governor, he’d want to help cities and towns work together by regionalizing services to save money.
“It’s a leadership issue,” he said. “It’s not something the governor can order, dictate or mandate.”
REPUBLICAN BILL BEARDSLEY
His plan for relief includes taking no-new-taxes pledge
Beardsley, former president of Husson University, said he supports the repeal effort.
He wants to lower taxes in many areas, but said it’s not practical to talk about cutting taxes until the state budget is balanced.
“You have to cut costs first,” he said.
To help the economy grow, Beardsley said, the governor must send a strong signal to businesses that the state is willing to help them by reducing corporate income taxes. He would also cut the inheritance tax to reduce the number of people who leave the state for part of the year to avoid full-time residency status.
As governor, he would veto proposed tax increases and hikes to tuition and fees. He’s a strong supporter of the no-new-taxes pledge.
His administration would have a goal of bringing tax rates down to the national average.
“I have very little interest in tax reform,” Beardsley said. “I have a lot of interest in tax relief.”
REPUBLICAN MATT JACOBSON
He takes the pledge, favors repeal, wants spending cuts
Jacobson supports the tax-law repeal, saying the law that passed is too complicated for small businesses.
As an example, he points to the different rates of taxes on candy, based on whether the products contain flour.
“Let’s start over,” he said. “When we’re not going to tax Kit Kat bars but we are taxing Milky Way, it makes me believe we haven’t thought this thing all the way through.”
Part of the problem is that the plan doesn’t address spending, he said. He thinks that the projected $1 billion budget deficit will give the new governor a chance to make fundamental changes to the state budget.
As head of a firm that recruits businesses to Maine, Jacobson said he’s been told by companies that they won’t come here because of the high personal income tax. That, along with corporate and capital gains taxes, makes it hard to attract and retain great companies, he said.
Jacobson has taken a pledge not to raise taxes on Maine residents.
“The people who don’t want to take the pledge are scared they won’t be able to fund government,” he said.
REPUBLICAN PAUL LEPAGE
He’d cut education, human services to trim income tax
LePage supports the tax law repeal effort.
“People aren’t stupid,” he said. “They can see through smoke and mirrors.”
He said if the bill had just reduced the income tax without making any other changes, he could have supported it. He advocates a reduction of the income tax to 5 percent, and would pay for it by cutting state government.
As mayor of Waterville, LePage has reduced the number of city workers and had others retrained to do multiple jobs. He said some employees shift from working in the assessing office to jobs in general assistance, if necessary.
“I don’t think it takes an electrician to change a light bulb,” he said.
Also, by reducing regulations, he feels he can reduce the number of state workers. LePage has taken a no-new-taxes pledge, and said reforms to education and human services will help save money so more revenues aren’t necessary.
DEMOCRAT PATRICK MCGOWAN
He wants to keep reform law, but says no to any new taxes
McGowan said he supports the bill passed by fellow Democrats, although he wants to do “a complete analysis of the legislation” to ensure it doesn’t take in more revenue than intended.
“I’ve been an advocate for tax reform for a long time,” he said.
One area of concern is the new sales tax on car repair, he said.
McGowan, former state Department of Conservation commissioner, said he wants to examine the billions of dollars in tax exemptions to see if it still makes sense to grant the same exemptions today.
“Any exemption that doesn’t reflect a Maine job or the modern Maine economy is one I would look at,” he said.
As with all Democrats, McGowan hasn’t taken a no-new-taxes pledge.
He said he doesn’t believe the state budget will be as bad as predicted when a new administration takes over, and said if he had to look for more revenue, he would try to find out if there’s a way for nonresident property owners to pay a larger share.
REPUBLICAN PETER MILLS
He likes the tax reform law because it cuts ‘tax on work’
Mills, a state senator, opposes repeal and is the only Republican in the field — or in the Legislature — to have voted for the tax reform law.
He says it’s important to lower the income tax, which he calls “a tax on work.”
“If it’s a choice between that or taxing sugar or meals out for Martha Stewart, that’s not a contest for me,” he said. “The tax code that’s on the ballot is a lot better than the one we’ve got.”
As governor, Mills would continue to try to reduce the capital gains tax and the top income tax rate. He has not taken a no-new-taxes pledge but says he has no intention of raising broad-based taxes.
He would consider raising the gas tax to pay for roads.
“I don’t know how you build roads without spending money,” he said. “We’ve borrowed all we can borrow for roads.”
And any state as reliant on tourism as Maine is must take care of its roads, Mills said.
When it comes to the state budget, Mills said that when the revenues return, it will be up to a strong governor to say no to all the “pent-up demand” for spending.
DEMOCRAT ELIZABETH MITCHELL
She’s proud of tax reform, questions no-new-tax pledge
As Senate president, Mitchell voted in favor of the tax plan that is now up for a people’s veto vote.
She’s voting “No” on Question 1.
“After 40 years of talking about reforming the tax system, we did it,” she said.
While some are critical of the corresponding sales tax expansion, Mitchell said this was the plan that gained enough consensus to pass.
She said the law will reduce income taxes for individuals and small businesses. In addition, if she were governor, she would look for ways to entice retirees to stay here year-round or for more older people to come here to retire.
She said those who pledge never to raise taxes don’t have enough experience in government. Citizens of the state need to be included in discussions about what the state can afford, she said.
“There is this notion that you can have anything you want and it doesn’t cost anything,” she said. “We need to be honest with people.”
REPUBLICAN LES OTTEN
He’ll vote to repeal the reform, but wants lower income taxes
Otten said he will support the effort to repeal the tax law.
“I’m going to vote reluctantly ‘yes’ to remove it because, in my humble opinion, it does nothing more than rearrange the deck chairs,” said Otten, founder of Sunday River ski resort and owner of four small businesses.
He said he uses the word “reluctantly” because he believes the state should lower the income tax. But he doesn’t support expanding the sales tax to new services or increasing the meals and lodging tax.
He doesn’t believe that it’s a good idea to tax tourists more because any money they pay in taxes is less money they’ll have to spend at local businesses.
“We want Maine to be attractive to people of wealth,” he said. “We need people who have wealth in Maine with a willingness to buy things. I think it hurts the tourism industry.”
The first job of a new governor is going to be to balance the budget, and Otten said he won’t raise taxes on Maine residents to do it. After that, he wants to consider a reduction in the income tax and the inheritance tax.
REPUBLICAN BRUCE POLIQUIN
He says spending reductions must accompany tax cuts
Poliquin said he supports repealing the tax-reform bill, and that any new governor must first tackle the looming state budget deficit before talking about cutting taxes.
“It is absolutely critical that spending reductions go hand in hand with tax reductions,” he said. “Without addressing spending first, tax reductions could push our state into insolvency.”
Poliquin, a business owner and developer, has called for an audit of every state department, agency and program to find out where there’s duplication. He would put in place performance standards and hire professional managers to oversee state operations.
When it comes to human services, Poliquin would save money by reducing benefits to the national average, and he wants a residency requirement before anyone can qualify for benefits.
He has taken a no-new-taxes pledge, noting that states that thrive have no tax on personal income.
He said the inheritance tax drives retirees out of the state when they could be spending more money here eating out, going to movies and buying goods and services.
“It is so important to get the cost of doing business and living in the state down,” he said.
DEMOCRAT STEVEN ROWE
He says upholding tax reform will stabilize state finances
Rowe opposes the repeal, describing himself as “very supportive” of the new law.
“I would say it does add stability and predictability to our state revenue stream,” he said. “I believe it will help set the stage for economic recovery in Maine.”
Rowe, former state attorney general, said by reducing the capital gains and income tax, the law would help make the state more competitive. He said the state’s tax system changes over time and needs to be reviewed to make sure it is keeping up with the modern economy.
He said it’s “irresponsible” to take a no-new-tax pledge when it’s sometimes necessary to make changes.
An example of that is the gas tax, which will become a less reliable source of revenue to repair state roads as more people buy cars that use alternative fuels, Rowe said.
Over the next four to eight years, Rowe said, the state will need to find another source of revenue to help pay for road repair.
He said it’s also important to look closely at where the state spends money to see if more investment in certain areas, such as domestic violence prevention, could save money in other areas.
“Before we consider raising taxes, we must do all we can to look for efficiencies in operations,” he said.
DEMOCRAT ROSA SCARCELLI
She likes the tax reform law because it lowers income tax
Scarcelli opposes the repeal effort.
In particular, she believes the top income tax rate of 8.5 percent must be lowered.
“I believe we absolutely cannot be taxed at 8.5 percent and be competitive,” she said.
She called the measure passed by Democrats in the Legislature “a step in the right direction,” adding that she was disappointed some industries were granted a last-minute exemption from the sales tax expansion.
After the law goes into effect, she will want to examine it to make sure it is fair.
She said the no-new-taxes pledge taken by some Republican candidates is “gimmicky and pandering,” and said she wants to evaluate all state programs in her first year in office to look for ways to save money.
“I won’t be looking at raising revenues until we have evaluated every single state program,” she said.
The other way to increase state revenues is by helping businesses succeed with targeted incentives for small businesses or startup companies, said Scarcelli, who runs a housing company. Also, the state must increase its investment in research and development, she said.
MaineToday Media State House Reporter Susan Cover can be contacted at 620-7015 or at: [email protected]