AUGUSTA – A May 21 Maine Voices column by Dan Coyne, legislative director for the Maine Center for Economic Policy (“LePage budget unfair, expensive for low-income Mainers”) was itself unfairly critical of Gov. LePage’s tax relief proposals.
MCEP has seriously mischaracterized the tax proposals in the budget, particularly when it implies the administration is proposing to cut taxes for only the wealthy. The reality is otherwise.
According to estimates prepared by Maine Revenue Services, the proposals will result in income tax relief for virtually every Maine resident, except for a handful of the wealthiest residents. In addition, it will remove a full 70,000 households from the income tax rolls.
The center also maintains that the top 10 percent of taxpayers will receive 44 percent of the tax cuts. Accepting that number, who are the 10 percent it regards as wealthy?
Any family that earns more than roughly $119,000. That could be a couple who are paper mill workers. Or, in some school districts, it could be a couple who are both teachers. Or it could be a small business owner.
Ask those people if they think they are wealthy. I think you know the answer.
In reality, according to Maine Revenue Services, the proposals will actually increase the percentage of Maine’s tax burden that will be paid by that “wealthy” 10 percent from just over 55 percent to nearly 57 percent of the total. The percentage of the burden paid by all other income groups will actually decline.
The center goes on to claim that average tax cut — in dollars — for higher-income taxpayers will be more than that given lower-income taxpayers. If you think about that for a second, it makes sense. If one is paying nearly $10,000 in annual income taxes, it only makes sense that they would get a larger tax cut — in dollars — than someone who is paying only $200 in annual taxes. You really have to turn the concept of fairness on its head to conclude otherwise.
Following that, the center makes the interesting claim that, rather than creating jobs, the proposals could actually be a “job killer.” That’s nonsense.
My organization would be the first in line to oppose this plan if there even a grain of truth to that claim.
Experts that have actually taken the time to study the issue also think otherwise. According to The Beacon Hill Institute at Suffolk University in Boston, these proposals are projected to increase disposable income by $277 million and create roughly 3,700 jobs by 2015. In this economy, that’s a pure win.
One could ask why the Maine State Chamber of Commerce would care about personal income tax cuts. The reason is simple. Roughly 70 percent of Maine businesses are not corporations and are not taxed as corporations.
They are so-called “pass through” entities such as partnerships, limited liability companies etc. As such, the income of the business is passed through directly to the partners or members who, in turn, pay personal income taxes on their share of that income.
Finally, the Center also points out that the estate tax relief provisions will benefit only Maine’s wealthier families.
Again, we would need to argue the semantics of “wealth,” but there is good policy reason behind the change.
First, it brings Maine’s tax closer to the federal estate tax by increasing the estate tax exclusion from $1 million to $2 million. (The federal exclusion amount is $5 million.)
More importantly, estate tax professionals from around the state repeatedly emphasized to the taxation committee that the tax is driving many of the state’s “wealthiest” residents out of Maine.
Why is that bad? When the wealthy leave Maine, they stop paying income taxes here and purchase most of their goods and services in other states. Even if they return as “snowbirds,” their contributions to the economy, sales tax payments and property tax payments significantly decline.
So who pays instead? We do.
Maine people have to pick up the tab for those lost tax revenues and some will lose business, or work, because of the decline in spending on goods and services here.
Worse yet, these are residents on which many groups rely for charitable contributions. In most cases, when wealthy residents leave Maine for another state, their charitable donations follow them.
Finally, there is the potential positive impact on many small family farms and businesses. Many of those are worth more than the current $1 million exclusion amount.
Increasing the exclusion may well make the difference between allowing their owners to pass them on as ongoing family businesses or being forced to sell them to pay off the taxes.
In short, we strongly disagree with the Maine Center for Economic Policy’s characterizations and strongly support the governor’s proposals.
We urge the full Legislature to enact them.
- Special to the Press Herald