May 16, 2013

Alan Caron: Tax overhaul architects deserve standing ovation

The Gang of 11's plan will grow Maine's economy and help our state finally move forward.

A few weeks back, 11 legislators, including equal numbers of Democrats and Republicans and one independent, released a bold plan to reform Maine's taxes. After months of work on one of our most tenacious problems, they declared that the time for tinkering with the tax code was over. For that alone, we owe them our thanks.

They're doing exactly what we ask of leaders in the government. They're working together to find innovative solutions to old problems, and moving beyond rehashed campaign speeches, talking points and party scriptures.

The group is led by independent Dick Woodbury, a leading expert on taxes and just about the most earnest and honest policy guy you'd ever want to meet. It includes party leaders like Republican Roger Katz and Democrat Seth Goodall, Democrat Emily Cain and Republican Denny Keschl, as well as Republican Amy Volk, Democrat Sara Gideon, Republican Lance Harvell and Democrat Mark Dion.

Predictably, forces on both the left and right -- who can hardly ever bring themselves to support compromise -- are outraged.

They generally distrust people who actually work across party lines to find common ground. Or that they have the audacity to tackle big issues while ignoring the many sacred cows that graze in the halls of the Legislature.

Within hours of the release of the tax plan, online sites lit up with marching bands of hysteria rallying their troops, presenting fears as facts and hastily erecting old barricades.

When it comes to making big and bold changes, particularly where we need it most, we're often our own worst enemy.

On issues like fixing the tax system or growing the economy, we seem to wear the skin off our palms with hand-wringing about what's wrong with an idea before asking what's right with it. Then we focus on one facet that might create the least bit of discomfort to someone, and ignore the vast benefits to everyone, including them.

Let's remind ourselves of why we've been talking about tax reform for decades and why we can't grow our economy without it.

Our income taxes are too high. This makes it difficult to attract and keep businesses and entrepreneurs, and encourages retirees to pretend they live in Florida.

Our property taxes are too high. We fund too much of government on the backs of property owners and, by extension, renters, which forces people to abandon their communities to find lower taxes in surrounding rural areas.

That migration drives up the costs of bringing education, public safety and fire protection to far-flung areas. It also makes every town covet its neighbor's Walmart, for the taxes it pays, and encourages short-sighted decisions about growth.

Our sales tax system incorporates more holes than cheese. We've managed to exempt anything that wasn't invented before the sales tax was, together with virtually any product or service that has at least one lobbyist in Augusta. That's made tax collections so volatile that state budget shortfalls have become predictable annual events.

n We don't charge tourists nearly as much as they'd happily pay. All the other tourist states figured this out decades ago. When you go to Florida, do you check beforehand to see what the tax is on hotels and meals? No, you don't. If you did, you'd need a few extra drinks during the flight.

By the time you leave, Florida will have held you upside-down and shaken your last penny out. On the way home, you'll dream about going back.

Here are the big solutions that the compromise tax bill offers:

Reduce income taxes by half.

Exempt $50,000 of property value from taxation.

Tax incomes less, for businesses and families, and consumption more.

Make tourists pay more.

Is the bill perfect? Of course not. But if perfection is the standard for change, we're all in big trouble.

I don't much like the tax on food and fuel oil, which are necessities that take a larger bite out of lower-income budgets, but there are lots of safeguards built into this bill to protect the poor.

So get ready for the doom and gloom campaigns by the left, the right and the status quo groups. It turns out that people who are against things are really well organized.

As for the rest of us, let's get behind some big and bold ideas for tax reform that can finally move the state forward. Then let's do the same on growing a vibrant new economy for Maine.

Alan Caron is a partner at the Caron & Egan Consulting Group and serves as the president of Envision Maine, a nonpartisan organization that promotes Maine's next economy. He can be reached at:

alancaroninmaine@gmail.com

 

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