December 5, 2013

Washington County residents have mixed reactions to plan to eliminate taxes

Maine's poorest county has struggled for years, and some wonder whether the FreeME proposal from the Maine Heritage Policy Center is the answer to overcoming poverty and boosting population.

By Colin Woodard cwoodard@pressherald.com
Staff Writer

EASTPORT — Water Street, the main drag in the center of America’s easternmost incorporated city, is missing something this year: boarded-up storefronts.

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Former Florida Gov. Jeb Bush speaks at the American Legislative Exchange Council's 40th annual meeting. The Associated Press

 

This story is part of a reporting partnership between the Portland Press Herald, The Guardian - a global news organization based in London and New York - and the Texas Observer. The documents obtained by The Guardian contain 40 funding proposals from 34 states, providing a blueprint for a conservative agenda for 2014 that could have significant impact throughout the U.S. The Maine Heritage Policy Center's proposal to eliminate income and sales taxes in Washington County is among them.

Read The Guardian's coverage 

Read the Texas Observer's coverage 

Read documents for all 40 proposals.

Read the Maine proposal.

 



The ALEC Connection

The American Legislative Exchange Council, an influential lobbying network of Republican politicians and big businesses, plans to penalize homeowners who install their own solar panels. It's part of a plan to block state governments from promoting the expansion of wind and solar power. Read the story.

 

The "Prodigal Son Project" is a plan by ALEC to lure back 40 lapsed corporate members who fled the organization after criticism of its policy on gun laws. The group shapes and promotes conservative legislation at the state level across the U.S. Read the story.

 

Beacon Hill Institute 

Boston's Suffolk University, host of free-market researcher Beacon Hill Institute, says the institute's grant application doesn't follow the rules or match the school's mission. Read the story.

When they were built in the late 19th century, the brick-and-granite blocks bustled with activity as shoppers came and went from surrounding homes, sardine canneries and the archipelago of Canadian islands just across the bay from what was a town of more than 5,000.

Today, the canneries are gone, the international border is far less permeable and Eastport’s population has fallen by three-quarters. There’s a ghostly feel to the city, which stands on an island beset by fog and 20-foot tides that make the surrounding ocean flow like a river.

But this fall, more shops, galleries and restaurants are staying open, and the rest are closed for the winter, not for good – signs that a long-anticipated renaissance is at hand.

“For 10 years we have been doing what we can where we are with what we have, and we’re really beginning to see the fruits of that effort,” says Linda Godfrey, above, co-founder of The Commons, a gallery exclusively featuring work by the area’s artists and craftsmen. “Throughout Washington County you can see these things happening, the result of our own efforts, energy and capabilities.”

That’s why many hereabouts say they were surprised by a conservative think tank’s proposal to further economic development by turning Maine’s poorest county into a gigantic tax-free zone. While open to considering its merits, many business and political leaders think the proposal is philosophically out of step with local efforts, which have emphasized homegrown revitalization rather than reliance on special breaks for the long-struggling county.

Under the Maine Heritage Policy Center’s “FreeME” initiative, Washington County residents and businesses would cease to pay state income taxes or collect sales taxes until economic conditions reach the statewide average and stay there for three years running. 

The initiative, introduced last summer and now being evaluated by Gov. Paul LePage’s administration, would make America’s easternmost county the first to waive such taxes in a state that has them. It is intended to showcase economic libertarians’ contention that taxes are a central impediment to economic development. 

According to a grant application acquired by The Guardian, a London and New York-based news organization, and passed on to the Portland Press Herald as part of a reporting collaboration, the Maine Heritage Policy Center sees it as “a research and demonstration project” that would “release residents from extreme government dependency” and “spark an economic boom that can be easily transferred to other areas of Maine and serve as an example for all the United States.”

ONE TAX-FREE COUNTY JUST THE START

The grant application was drafted in May for submission to the State Policy Network, a national group that funds and coordinates activities between the Maine Heritage Policy Center and 62 similar think tanks across the country. The group intended to seek funding for promising proposals from the Searle Freedom Trust, an important donor to conservative groups such as the American Legislative Exchange Council, Americans for Prosperity and the State Policy Network itself, according to The Guardian.

The Maine Heritage Policy Center requested $35,000 to underwrite most of the cost of the project, which originally included an effort to adopt anti-union “right to work” laws in Washington County. It is not clear if funding was approved, although the policy center launched its FreeME website and associated research study late last summer, as promised in the grant proposal’s timeline.

In the application, the group said it was acting in part to counter the “Fair Share Now” initiative, a proposal by a coalition of progressive and labor groups during this year’s state budget process that sought to shift more of the tax burden onto the wealthy. 

In the face of such liberal efforts, the group wrote, “FreeME will allow MHPC to go from defense to offense.”

“Washington County has so much going for it that I think there is no reason outside of policy that it shouldn’t be booming,” says J. Scott Moody, the Maine Heritage Policy Center’s CEO. “Maine’s high tax burden is a big part of the reason why it is among the poorest counties. If we can correct that where it’s worst, that will help economic development in the entire state.”

Washington County was chosen because it ranked worst among Maine’s 16 counties under a series of economic metrics developed by the policy center. Once the county rises above its nearest competitor – now Aroostook County in northernmost Maine – the program would be expanded to the new last-place county.

That would continue, theoretically, until all of Maine had been treated, which supporters acknowledge would likely take decades. Counties that maintained the statewide average economic performance under the metrics for three years running would graduate from the program, although Moody hopes something resembling New Hampshire’s tax system would then be imposed.

“We won’t need the old system because the economy will be larger and there will be less need for governmental welfare,” Moody says.

Initially, with only Washington County in the program, he estimates that lost revenues would amount to $35 million a year – out of $2.3 billion in such taxes collected statewide – and suggests that could be paid for with budget cuts.

HOPING DEMOCRATS GET ON BOARD

For the proposal to be implemented, the Legislature would have to pass a law, and that’s an uncertain prospect with Democrats in the majority.

“When all you have is a hammer, everything is a nail, and unfortunately this governor and the Maine Heritage Policy Center only have a hammer in their economic toolbox,” says House Majority Leader Seth Berry, D-Bowdoinham, who co-chairs the Legislature’s Workforce and Economic Future Committee. “The hammer is, ‘If we put a new loophole in our tax code, our problems will be solved.’ But the data doesn’t bear out that point.”

State Sen. David Burns, R-Whiting, who represents all of Washington County, says he hopes to introduce a bill and win over his Democratic colleagues.

“Washington County has been making some significant strides, but it’s been a tough time for everybody,” he says. “I think this will help spread businesses into the county that will create jobs and improve the economy. It will increase the interest of business here, something we haven’t seen in 40 or 50 years.”

The governor’s office and the state Department of Economic and Community Development did not respond to requests for interviews. The administration has previously indicated that it supports the proposal, and might submit legislation.

RESIDENTS NOT ENTHUSED ABOUT PROPOSAL 

The response to the initiative has been mixed here in Washington County, where many say the economy is starting to rebuild because of a grass-roots, up-from-our-bootstraps effort by local business people and officials. But all acknowledge there is a substantial hole.

Eastport has lost three-quarters of its inhabitants over the past century, but many here think it has started a renaissance. Colin Woodard/Staff Writer

Over the past century, the county has lost a quarter of its population (now 32,000) while the nation’s has nearly quadrupled. It has Maine’s highest rates of unemployment (8.4 percent) and poverty (20.4 percent). 

Many of the county’s residents cobble together a living off the land, cutting wood, raking blueberries, gathering balsam tips for wreath-makers, digging clams or picking the area’s oversized periwinkles off the shore as the seasons and markets allow. 

Paul Molyneaux of East Machias, a fisherman and writer who has done all of those things, says the loss of access to many of those resources, through overharvesting or mechanization, has made it harder for many to make ends meet. FreeME strikes him as not quite hitting the mark. 

“Suppose I go to the store and buy $50 worth of clothing and save $3 in taxes – that’s nice, but it’s not going to do much for me over the long haul,” Molyneaux says. “It seems like a ‘give a man a fish’ instead of a ‘teach him how to fish’ argument, because without access to resources, it’s not going to carry you very far.”

But Washington County – much of which is a four-hour drive from Portland and two hours from the nearest commercial airport or Starbucks – is not as isolated as it was, because of the spread of broadband Internet. 

“As soon as you cross into the county on Route 1, every turn you make you’re in a place even more beautiful than the one before,” says Susan Corbett, founder and CEO of Axiom Technologies, a full-service information technology company in Machias that brought broadband to large swaths of the county, which is a third larger than the state of Delaware. “People who visit are realizing that as long as they’re connected (via the Internet), does it really matter where you wrote from? You can still work while the little ones frolic in the sand. That’s changing things.”

Would FreeME make a major difference? “Maybe. It might be another tool for the toolkit,” Corbett says. “But there are a lot of people who have been laying the foundations for moving our economy forward, and that’s what’s happening.”

OFFICIAL LIKES INITIATIVE’S BOLDNESS

Chris Gardner, above, chairman of the county commissioners and executive director of the Eastport Port Authority, agrees that the primary solution to the county’s problems lies within.

“We’ve been browbeaten for so long around here, people say nothing can ever happen, and that’s been our biggest problem: our lack of vision and courage,” he says. “We’ve been retreating through the forest for 40 years, and all it’s done is get us lost. We need to stop, start digging foxholes and go on the economic offensive.”

Gardner believes that his native county can win. Take the port of Eastport: With 64 feet of water at low tide, it’s the deepest natural port in the continental U.S., relatively close to Europe, in a community with a strong industrial and maritime heritage.

With the Panama Canal undergoing widening, he notes, the world’s shipping companies are rethinking their routes and strategies, because many major ports aren’t deep enough to accommodate the larger, deeper-draft vessels that are being built. The missing piece, he argues to one and all, is a $51 million rail connection that could make the city a significant North American cargo port.

“We can sit back and hope somebody picks up the phone and calls us, or we can be problem solvers and go out into the world offering the solution to customers’ issues,” he says.

Gardner likes FreeME, because of its boldness if nothing else. “Washington County is dying, and we need to embrace new initiatives,” he says. “It’s a marketing tool if nothing else.”

PROS, CONS, QUESTIONS ABOUT ‘AGENDA’

In October, Gardner and the Maine Heritage Policy Center tried to win FreeME an endorsement from the county commissioners, who demurred, seeking further information.

“I think we need to look at the economic development of the entire state, not just make special provisions for one county or another,” says Commissioner Vinton Cassidy, a former mayor of Calais who, like Gardner, is a Republican. “I spent six years in the state Senate, and I can tell you that thing is never going to get through the Legislature for a whole host of reasons.”

If it were to pass, it would encourage entrepreneurial activity, creating wealth and solving the problems associated with poverty, says Jonathan Reisman, an economist at the University of Maine Machias and an associate scholar for the Maine Heritage Policy Center.

“It’s a bottom-up approach rather than having the government make a particular infrastructure investment,” he says. “The argument is that the government doesn’t have a good track record of spending money wisely.”

The Center for Media and Democracy, a national group based in Madison, Wisc., that tracks the activities of State Policy Network members and associated groups, says Mainers should be wary of the proposal because of its source. Last month, it released a report alleging that the network is funded largely by global corporations and by groups and foundations associated with conservative billionaires David and Charles Koch. 

“Groups like MHPC paint this work as ‘economic development’ but we need to look at where they are coming from and who is funding their agenda,” says spokeswoman Rebekah Wilce who, by coincidence, was born in Washington County.

Their agenda, she says, is to pass bills that “benefit corporate funders, not the people of Maine.”

Back at The Commons, Linda Godfrey finishes wrapping a gift for a customer from Calais, the county’s largest community (population 3,100).

“I do think we need to be very cautious, and think carefully about what this is really about,” she says as the customer leaves. “There’s always been this attitude about Washington County that we can’t take care of ourselves. And here we are moving forward and this comes along.

“I’m not saying I’m against it,” she adds with a smile, “but it is a little strange.”

Colin Woodard can be contacted at 791-6317 or at:

cwoodard@pressherald.com

Twitter: @WoodardColin

 

 

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