PORTLAND – Gov. Paul LePage’s proposal to close Maine’s budget gap by making deep cuts in Maine’s commitment to state funding of education and Maine’s social safety net strikes this Maine resident and taxpayer as depressing and demoralizing — and exactly the wrong course of action at the wrong time.

Now is the time we need to double down on our investment in Maine’s economic capital of highly trained and well-educated young citizens.

This is also no time for the state to deprive its cities and towns of the modest revenue sharing that has hitherto been available.

However, the plan aired by some Democratic legislators to “tax the rich” by increasing high-end Maine income tax rates so that Maine’s high-income taxpayers will pay the same percentage of their incomes in all state and local taxes as do its lower-income citizens may also be short-sighted and counterproductive.

While the federal government can, and should, significantly increase the income taxes paid by all of our nation’s high-income taxpayers, it is quite another matter for an individual state to attempt to do the same thing.

Each state can tax the incomes of its own residents and incomes of nonresidents actually generated within that state.

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High Maine income taxes have already caused a large number of well-to-do Maine residents to change their residences to New Hampshire or Florida, depriving Maine of the ability to tax their incomes at all.

A further sharp income tax increase of the kind envisioned by the Democratic leadership would surely accelerate this unfortunate trend and cause many of the remaining high-income Mainers to take their incomes to be more gently taxed elsewhere.

The fact that low-income Maine residents pay a higher percentage of their incomes in taxes than do higher-income Maine taxpayers arises from the highly regressive sales and real estate taxes.

Poor people expend a higher percentage of their incomes on taxable purchases than do the wealthy. Local real estate taxes similarly take a higher proportion of the incomes of low-income homeowners than of their high-income fellows.

One way to raise revenue and counter this regressivity is to extend the sales tax to a range of services generally purchased by higher-income taxpayers.

Collecting sales tax on charges for most professional and personal services would expand the tax base and increase revenues at relatively little cost to low-income citizens.

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The real estate tax burden could be spread more evenly by taxing the property of large, private nonprofits with multimillion-dollar revenues, such as major hospitals, schools and colleges. These non-taxpayers are supported in large part by the national government and the more well-to-do of Maine’s citizens, so that taxes assessed on their real estate would come largely from these sources.

Maine’s vast influx of summer tourists could pay a greater share of the costs of infrastructure and public order by strategic adjustments to tax rates and license fees on a seasonal basis.

A modest seasonal increase in taxes levied on vehicle fuel, hotel accommodations, restaurant services and even general sales could raise revenues that would be mainly paid by these seasonal beneficiaries of Maine’s climate and scenery. Maine could move more energetically toward taxing incomes of part-time Maine residents and in-state purchases from out-of-state businesses.

All methods of generating revenues to cover the cost of government have their pluses and minuses. There is no perfect form of taxation. Someone’s ox is always at least a little bit gored.

The key, however, is to conduct the debate about how we raise the funds to pay for our government in a thoughtful and pragmatic fashion. How can we balance the budget with the least burden to those who can least afford it and the least disadvantage to our state’s chances in the competitive economy?

There is no question that Maine will have to expand its revenues to meet our present and future public needs. Unlike our federal government, Maine must balance its income with its outflows.

Across-the-board cuts in our investment in the education of our young or the financial viability of our cities and towns pave the way to a bleak future for us all. But over-hasty resort to upping income taxes on our higher-income citizens may ultimately leave us poorer than when we started.

We have to be creative. There are wise ways by which we can increase revenues, reduce tax inequality and foster the growth of our state. Let’s put our heads together and enact a revenue package that will do the job at the least pain to all Maine residents.

 


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