Sunday, April 20, 2014
Today we depart from our usual practice of giving one view of an issue as the newspaper's position. Instead, we offer a pair of views written by our two editorial writers.
Mainers don't often get a chance to vote directly on how they will be taxed -- or by how much. And if you look at recent efforts to give them more power over state and local government revenues, you'd think they didn't care about it.
In recent years voters have turned down three referendums to cap or control local and state taxes, and another one aimed at reducing the municipal excise tax on personal property.
So, when Democrats in Augusta decided they would rejigger the state tax code based on their own peculiar conceptions of "fairness" and "revenue neutrality," it's likely that few people would have said a repeal effort could get off the ground.
And yet, one has, thanks both to politicians and activists who think, correctly, that what the state needs is not a nip here and a tuck there, but substantially lower taxes overall.
And this bill, despite misleading advertisements to the contrary, does not provide anything close to a significant tax cut for most Mainers.
The vote next Tuesday to overturn the "reform that isn't" deserves a hearty "yes" vote, first because the law contains serious flaws -- too many to list here in detail.
However, a brief recap is in order, first with income taxes:
• The claimed "reduction" in the top tax rate from 8.5 percent to 6.5 percent turns out not to include a 1.5 percent phase-out of the "household tax credit," which replaces most deductions. As the Maine Heritage Policy Center notes, that hikes the effective marginal tax rate back to 8 percent.
• Because the "credit" that replaces deductions is capped, people who give large amounts to charity or who have substantial medical bills or business expenses will lose much of the benefit of those deductions.
• And the bill cancels indexation of tax rates, building in an automatic inflation-induced hike in those rates over time.
Second, sales tax changes:
• It's widely known that Mainers will be paying sales taxes on 102 new categories of services. Need a car repair that costs $1,000? Be ready to ante up another $50. And how many tourists will be paying that one?
• Even worse, however, thousands of small businesses will be collecting and reporting sales taxes to the state for the first time. The MHPC says that costs 9.34 cents for each $1 collected, and guess who will be paying that added overhead?
• Finally, the bill treats Mainers' incomes differently than out-of-staters who earn income here, something that will likely be ruled unconstitutional.
The measure's flaws aren't the only reason to vote it down, however: It deserves to be deep-sixed because passing it will take any pressure off Augusta to produce a reform that is 1) real and 2) substantial.
Too many lawmakers will say, "Oh, we dealt with tax reform last year" -- and Mainers will wait years for the truly lower taxes they deserve to get now.
Repealing this overly complicated and cobbled-together grab bag, however, will put tax cuts right back on the front burner, where they belong.
A "yes" vote will tell both new and returning lawmakers that tax cuts are what counts.