May 10, 2013

Maine Voices: Bipartisan group's plan for overhauling tax code holds great promise

The bill asks non-residents to pay more, thus relieving the tax burden on Maine's year-round residents.

By TIM HUSSEY

NORTH BERWICK - As a lifelong Maine resident who runs a 178-year-old family business, I am frustrated that Maine's economy continues to lag.

I also co-chair the Maine Economic Growth Council, a statewide organization charged with measuring and tracking Maine's key economic indicators. I am writing to support a proposal just made in our Legislature that has the potential to give Maine's economy a significant boost.

Too often today when we think about our government, we complain about partisanship, a lack of bold thinking and do-nothing results.

Well, a remarkable bipartisan group of 11 legislators in Augusta has come together to prove us wrong. A bold and exciting proposal has been laid out for tax reform in Maine, in the form of L.D. 1496.

Maine's tax code has long been filled with complexity, disincentives and a mix of tax burdens that most anyone who has studied it says needs to be changed.

Our tax code is holding back investment and growth in our economy, and this bipartisan group has the vision to bring us to a place of leadership in tax policy, impacting virtually everyone in this state.

Tax policy can be complicated, but the essence of this bill is in its overview:

This bill would overhaul Maine's tax code. It is designed to raise a larger share of tax revenues from nonresidents, while relieving the tax burden on year-round residents.

The bill reduces Maine state income taxes, corporate income taxes and homestead property taxes; moderates the regressivity of sales and property taxes on lower-income households; stabilizes tax revenues, and creates a more attractive tax environment for individuals and businesses that locate in Maine.

Because nonresidents share many of the benefits of Maine's communities, roads, hospitals, environment and quality of life while they are here, while avoiding many of the taxes paid by residents only, the reforms also reflect a fairer apportionment of government costs.

The bill accomplishes its objectives by increasing revenues from sales and excise taxes, which are paid by both residents and nonresidents in proportion to the time they spend here, and by collecting less from income taxes and homestead property taxes, which are paid almost entirely by residents.

There have been countless studies, several of which I have participated in, that have called out Maine's tax code as a major barrier to our economic growth opportunities.

Our high income tax rate drives out entrepreneurs and wealth creators, as does our high estate tax. Property taxes are high for too many Maine citizens, and too much of our government relies on this source of income, which is a particular burden to lower-income residents.

The base for our sales tax is actually quite narrow compared to many other states, and our heavy dependence on it makes our revenues unpredictable in economic ups and downs. And our lodging tax is quite low relative to other tourist-based states; thus, we are losing an opportunity to shift some burden to nonresidents.

Let's see -- reduce income and property taxes; spread sales taxes more broadly (with a 1 percentage point rate increase); shift more of our tax burden to visitors and nonresidents, and actually reduce the total tax burden for Maine citizens. What's not to like?

Well, forces are mobilizing already against this common sense proposal. Grover Norquist, an out-of-state anti-tax libertarian, is already trying to tell our legislators how to vote (no) on this. Lobbyists for special interests have already mobilized. There will be certain voices complaining they are being unfairly impacted.

One thing I know -- when major change is proposed, it's easy for those impacted directly to try to shoot it down. Major change for the positive happens, and not so often in politics, when the greater good is kept in the forefront. This takes courage and vision by those in the fray.

This proposal is one of those moments when we can seize the opportunity for the greater good of our state.

We are fortunate that we have 11 in the Legislature who have chosen to lead, and others who are following. This "Gang of 11" and all their peers in the Legislature need to hear from their constituents that doing the right thing for the future is indeed the right thing.

I predict that if this reform can get passed, it will be recognized for years in the future as a major milestone in Maine's economic history, one that put he state on track for growth, investment and a bright future for all Maine citizens.

Tim Hussey is CEO of Hussey Seating Co. in North Berwick.

 

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