Saturday, December 7, 2013
As many now know, Maine's state and local ''tax burden'' is not as high as once believed (by some). In 2007, the Washington D.C.-based Tax Foundation had ranked Maine second in terms of state and local tax burden. In 2006 Maine was No. 1.
A new analysis by the foundation places Maine at 15th. While 15th is a relatively high ranking, Maine's tax burden of 9.7 percent is a mere 3 percent above the national average, not 30 percent as previously asserted. Furthermore, the foundation corrected its analyses from previous years and those revisions remove Maine from the highest ranks.
Why the change?
The Telegram observed that the Tax Foundation ''decided to change its calculation to include how much Mainers pay in taxes to other states while factoring out how much out-of-staters pay in taxes here.'' The first half of that statement is not quite accurate and suggests that the Telegram probably never understood these rankings which it so-often cited in the past.
For years, when calculating each state's tax burden the Tax Foundation employed a methodology that ''exported'' taxes from the state where the tax was collected back to the home state of the payer.
For example, most of Alaska's tax revenue comes from ''severance'' taxes on companies that extract oil in Alaska. The Tax Foundation rightly asserts it would be laughable to portray Alaskans as having the highest tax ''burden'' since the people who are actually burdened by the oil severance tax are drivers like you and me -- not Alaskans.
That is why Alaska, which has the highest per capita tax collections of any state in the union, ranks last in terms of tax burden.
Severance taxes, corporate taxes and tourism taxes have been included in the foundation's ''export'' methodology for years. Maine is less reliant on these taxes and had been accordingly disadvantaged.
This year, significantly, the Tax Foundation finally applied their export methodology to the property tax that Maine relies on too much.
Using a methodology that misled people into believing that Mainers' incomes were somehow burdened by Martha Stewart's property tax bill is as inaccurate as believing Alaska income must carry the burden of its oil tax.
The previous rankings perpetuated a fraud and the Tax Foundation deserves criticism on this point. It should have never applied an export methodology to some taxes but not others. Those who used the rankings in an attempt to influence public policy should have known about the flaw in the methodology and they too deserve blame. That said, it is good that the misleading methodology has been corrected.
For policy makers, voters and journalists perception is often reality. To the extent that previous rankings created the perception that Maine was substantially ''worse'' than every other state with whom we compete for businesses, visitors and residents, the people of Maine have been poorly served.
This is not to say that taxes in Maine are no longer a burden. Maine's total tax collections (from all taxpayers) also ranks 15th in the country at $4,543 per person. This is also higher than the national average. So, efforts to reduce the tax burden continue to be important.
Unfortunately, in responding to the new facts about Maine's tax burden the Telegram perpetuates more myths. It once again repeated its unsupported belief that having many municipalities leads to inefficiency and unnecessarily high taxes. In fact, having many municipalities costs less in bureaucracy and there is plenty of data and analyses to prove it.
For example, a 2005 Federal Reserve Bank of Boston analysis showed that Maine local governments have 30 percent fewer local (non-school) employees than the national average. Local (non-school) employees earn $10,000 less than their counterparts nationwide, and in terms of ''burden,'' total local government (non-school) payroll as a percent of state income is 44 percent less in Maine than the national average.
Contrary to the view of the Telegram, Maine's hundreds of towns and cities are efficient, cost-effective and have been so for a long time.
One misleading analysis down, many misinformed editorials to go.
— Special to the Telegram