May 12, 2013

Two sides of reforming Maine taxes

Pro: A bipartisan plan would cut residents' taxes and improve our economy. Con: The irrational 'Gang of 11' proposals would make our tax structure less fair.

PRO: DICK WOODBURY, SETH GOODALL and ROGER KATZ

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Staff Photo Illustration/Michael Fisher

DOLLARS AND SENSE

The Portland Press Herald/Maine Sunday Telegram wants to know what you, the readers, think about the tax reform plan proposed by the “Gang of 11.” Write to us by Wednesday, and we’ll present a representative sample of your views in next Sunday’s Telegram.

Letters may be emailed to letterstotheeditor@pressherald.com (no attachments); faxed to (207) 791-6920; or mailed to: Letters to the Editor, Portland Press Herald/Maine Sunday Telegram, P.O. Box 1460, Portland, ME 04104-5009.

Letters should run about 300 words or less. Please include your name, address and daytime phone number for verification purposes.

Could this finally be the time for major tax reform in Maine? With Democratic majorities in the House and Senate, a Republican governor, a budget gap that defies easy solutions, and fatigue with stopgap measures and one-time fixes, the opportunity may never be better.

The opportunity for transformative change has been set up, possibly even deliberately, by a budget proposal from the governor that is unpalatable to large segments of both parties, local towns and members of the public. By suspending municipal revenue sharing, and terminating the homestead exemption and property tax refund programs for Maine residents under age 65, the governor's budget can't help but raise property taxes on Maine families.

Suppose there were an alternative that instead of raising property taxes on Maine homeowners reduced them by an average of over $500?

Suppose the alternative cut income taxes for Mainers to no more than 4 percent?

Suppose the alternative reduced or even eliminated the regressive burden of sales and property taxes on lower-income Maine families, sending reimbursement checks of $1,000 or more to families struggling to pay their sales and property taxes now?

And suppose that even in reducing these taxes on Mainers, the alternative still generated as much revenue for schools, health care and other government services as what we collect under our outdated tax policies?

These are the basic objectives that have guided a bipartisan group of 11 of us in shaping a tax modernization plan that we believe would transform Maine's economy for the better.

If you are concerned about the regressive burden of sales and property taxes on Maine families, who continue to struggle in fragile economic times, then this plan should interest you.

If you are concerned that Maine's 7.95 percent income tax holds back Maine's economic growth prospects, and you think cutting that rate in half would help move Maine forward, then this plan should appeal to you, too.

As improbable as it may seem, accomplishing this set of objectives is mathematically and logistically feasible. The secret formula (or maybe not so secret) is to scale back the many tax advantages that we currently convey to nonresidents in Maine and reassign those advantages to Maine residents instead.

We have many nonresidents who spend time here in Maine. Some are short-term visitors who flock to Maine's spectacular recreation sites. Some are owners of second homes, who visit Maine regularly and for extended periods, but whose primary homes and employment are in Massachusetts, Connecticut, New York or other states. Still others divide their time equally between Maine and another state, but choose the other state as their legal residence.

Nonresidents share all of the benefits of Maine's communities, roads, hospitals, environment and quality of life while they are here. But they avoid taxes that are paid by residents only. Our aim is to draw a fairer share of government costs from everyone who spends time here.

We also want to incentivize more people to live and do business in Maine.

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

The property tax provisions of our plan are anchored by a $50,000 homestead exemption. Our preliminary analysis shows that Mainers will see an average property-tax reduction of more than $500 statewide.

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