AUGUSTA –– The bid to win public favor for competing tax plans intensified at the State House on Wednesday, a sign that Maine could be heading toward significant reform.
Republican Gov. Paul LePage unveiled an online calculator so residents can determine the impacts of his proposed overhaul. Democrats, meanwhile, released an analysis of how a counterproposal they released last week will affect people at different income levels. The two plans have significant differences, specifically on which taxpayers benefit most and the overall reduction in the income tax rate.
However, there is also common ground. LePage wants to reduce the income tax. So do Democrats. Both also believe that paying for an income tax cut can be achieved by broadening the sales tax to include additional goods and services. House Speaker Mark Eves, D-North Berwick, and LePage both acknowledged that a compromise is possible, but not before sharply criticizing the folly of the other’s plan and what they described as a fundamental misunderstanding of economics.
The Maine Center for Economic Policy, a left-leaning policy group, and the Institute on Taxation and Economic Policy, a Washington, D.C., nonprofit, released an analysis Wednesday touted by Democrats that compares the two plans.
It showed that, on average, the Democratic plan would reduce taxes for the bottom 95 percent of Maine taxpayers. It would also reduce taxes more than the governor’s plan, on average, for the bottom 80 percent of Maine families.
For example, according to the groups’ analysis, the tax for those earning $36,000 to $57,000 a year would decrease an average of $24 under LePage’s plan and $191 under the Democrats’ plan; the tax for those earning $57,001 to $89,000 would decrease by $93 under LePage’s plan and $169 under the Democrats’ plan; and the tax for those earning $167,000 to $371,000 would decrease by $1,275 under LePage’s plan and $1,065 under the Democrats’ plan.
LePage introduced an online tax calculator to show how his plan would cut income taxes over present levels. It can be found at maine.gov/governor.
Although the calculator is featured prominently on the home page of the governor’s office, it’s not clear how many taxpayers will actually want to use the tool, which resembles an IRS form with a daunting array of fields for entering detailed tax data.
LePage, in a wide-ranging news conference, tore into the Democrats’ plan, labeling it as “same old, same old” patchwork of gimmicks that won’t reduce the income tax enough to make Maine competitive with other states. He said their plan focuses too heavily on protecting state aid to municipalities, which, he said, have been “crying” that his plan will eventually eliminate that aid.
Eves, citing figures from the analysis released Wednesday, said the Democrats’ plan will give a bigger tax break to middle-class Mainers. He described the governor’s plan to give a larger tax cut to wealthier Mainers as “failed trickle-down economics,” a theory put in practice in states such as Kansas, where lawmakers are considering cuts to education and closing schools early in order to pay for tax reductions and close budget gaps.
Still, Eves said, if Mainers are going to get a tax cut, it should primarily benefit property taxpayers and middle-income earners.
“When you look at the governor’s plan and our Better Deal for Maine plan, we beat the governor’s plan every time,” he said.
The governor acknowledged that his current plan will lead to a sharp decrease in state revenue – approximately $300 million. That could mean that big-tickets items in the state budget – education spending and social services within the Department of Health Human Services – may see major funding cuts by the time his tax plan goes into full effect by 2019.
When asked how state government should shrink to accommodate his plan to cut the income tax, LePage was not specific.
“I don’t think state government needs to shrink so much as state government needs to be more efficient and more effective,” he said.
The comments by Eves and LePage illustrate the competing ideologies at the heart of the tax debate in Maine and Congress. Nonetheless, that Democrats and LePage agree that there should be an income tax cut suggests a path to a fundamental change in the state’s tax system.
“We have a different philosophy on who should benefit and how to grow the economy,” Eves said, adding, “We think there’s a lot of room for compromise. We are at the table negotiating this. … Our intent in bringing out a plan was not to say what we didn’t like about the governor’s plan, but to say what we think better grows the economy. We intend to sit with the Republicans and find a deal that we can all agree on in the end.”