Wednesday, December 11, 2013
By GARRETT MARTIN
AUGUSTA - We've got a dilemma in Maine. We want good public schools, good roads and reliable police and fire protection, but Gov. LePage's budget proposal undermines our ability to invest in each of these while also raising taxes for the typical Mainer.
This is the wrong direction for our state. To put Maine on a better path, the governor and Legislature should focus on four key reforms to make our tax system fairer and raise the money Maine needs to invest in things that boost our economy, like good schools, good roads and safe and vibrant communities.
• Make sure everyone pays their fair share in state and local taxes.
A snowplow driver or home health caregiver shouldn't pay more in taxes on every dollar they earn than a high-paid executive, but that's exactly what is happening in our state.
The richest Mainers pay less than 10 cents on every dollar in state and local taxes, while the poorest 20 percent of Mainers pay more than 17 cents on every dollar they earn. That means that these hardworking people pay 70 percent more from their paychecks in taxes than the wealthy.
By eliminating the property tax homestead exemption and the property tax and rent refund program for everyone under age 65, the governor's budget will actually make this inequity even more unfair and raise taxes for low- and middle-income families who can least afford it.
It's time for this to change. Maine's wealthiest taxpayers should pay at least the same percentage of their income in taxes as the average Mainer. This can be done by having them pay a little more while also preserving and improving tax credits for low- and middle-income Mainers, like the property tax and rent refund program and the state earned income tax credit.
• Repeal recent income and estate tax cuts.
To pay for recent tax cuts, the governor's budget shifts costs to property taxpayers, hitting low- and middle-income households even harder. That's because property taxes account for a greater share of overall taxes for working people.
At the end of the day, Maine's wealthiest residents will still get a hefty tax cut, while taxes on the average Mainer will go up.
If we repeal the recent income and estate tax cuts this won't happen, and we could use the money to invest in things that will help our economy, like education, training and roads.
• Get rid of corporate tax breaks that aren't helping our economy.
Large corporations like Walmart get significant subsidies through Maine's tax code giving them both a financial windfall and an unfair advantage over Maine-owned businesses.
These subsidies deliver no economic benefits -- Walmart would do business in Maine anyway -- but hurt our ability to invest in education and infrastructure that do make Maine a better place to live and do business. Maine's patchwork of tax loopholes for businesses merits much greater scrutiny and accountability.
• Nonresidents must pay their fair share.
Maine remains a proverbial "cheap date" for out-of-state visitors. Our lodging tax is among the lowest in New England and significantly lower than other tourist-friendly states.
But visitors certainly benefit when we invest in infrastructure and maintain Maine's natural beauty. By raising the lodging tax, we will make sure that our visitors who stay in hotels help pay for those investments.
For the same reason, we should also restore the homestead exemption so that Maine resident homeowners get a break on their property taxes and nonresident home-owners pay their fair share.
Some people still insist that cutting spending to preserve the 2011 tax cuts is the best solution for Maine, but that's not a real solution.
Spending cuts that merely pass the buck to towns and property taxpayers are not fiscally responsible and will not result in a budget that reflects the values of Maine people. Plus, there is little left to cut.
As Gov. LePage's chief budget officer recently testified,we're out of "low-hanging fruit." If enacted, the governor's budget proposal would make Maine's already unfair tax system worse and force municipal spending cuts that will hurt Maine's economy.
It doesn't have to be that way. By foregoing income and estate taxes for the wealthy that we can't afford and adopting sensible reforms, lawmakers can improve tax fairness and secure the resources needed to invest in Maine's schools and communities.
Everybody wins when we all pay our fair share.
Garrett Martin is executive director of the Maine Center for Economic Policy.