May 1, 2013

Bill Nemitz: A tax plan that cuts it for Mainers

By Bill Nemitz bnemitz@pressherald.com

To: Someone from away

From: A weary Maine taxpayer

Re: Paying your fair share

First, dear visitor, don't take that subject line the wrong way. As one of the millions who annually migrate to this glorious state starting right about now, you remind us how lucky we Mainers are to call Vacationland our year-round home.

It's just that for a long time, we've had a problem. And today at a State House press conference, 11 courageous Maine lawmakers – five Democrats, five Republicans and one very knowledgeable independent – will finally step up and lay it out in terms we can all understand:

We full-timers pay too much in state and local taxes to make this place the jewel that it is.

At the same time, you folks from away don't pay enough.

And that needs to change.

"This is not a gouging exercise at all," insisted state Sen. Richard Woodbury, the independent from Yarmouth who's the architect of the "Gang of 11's" proposed overhaul of Maine's entire tax system.

Rather, Woodbury explained in an interview Tuesday, it's a long-overdue effort to inject more fairness into a tax system that now has us year-rounders picking up the tab for all of you lobster lovers.

A little bit about Woodbury: He's got a Ph.D. in economics from Harvard University and, as a visiting scholar with the Federal Reserve Bank of Boston's New England Public Policy Center, authored a hefty report a few years ago entitled "The Struggle for Tax Reform in Maine, 2003-2009."

In other words, the man knows taxes inside out and sideways. And the more he's looked at Maine's troubled system, the more Woodbury has concluded that we need more than occasional tweaks (like the recent reduction in the top state income-tax rate from 8.5 percent to 7.95 percent) to get our revenue house in order.

"This is a much bigger plan" than past attempts at tax reform, noted Woodbury. "There is much more exporting (of the state's tax burden) in this plan, a much bigger share from non-residents."


Well, the numbers are still being crunched.

But for starters, according to a month-old draft of the reform plan, Maine's 5 percent sales tax (lower than that of 41 other states) would rise to 6 percent.

At the same time, a laundry list of sales-tax exemptions for all but health-care and educational purchases would be eliminated.

Beyond that, the lodging tax would go from 7 to 10 percent, the meals tax from 7 to 8 percent, the auto-rental tax from 10 to 15 percent, the cigarette tax from $2 to $3.50 per pack, and the excise tax on beer and wine (gulp) would double.

Wait! Before you cancel that summer trip, cherished tourist, do the math: If you spent, say, $125 on lodging, $200 on meals, $100 on souvenirs and $75 on a rental car in one fun-filled day here, the added tax burden on your $500 outlay would be . . . let's see . . . just over $10.

Still coming? Thought so.

So what's in this tax plan for us Mainers?

A lot.

To help offset the increased (and admittedly regressive) sales-tax burden, the state would give low- and middle-income Mainers a "sales tax fairness credit" of as much as $1,000 on their income tax bills.

Maine's estate tax, long blamed for driving well-heeled retirees to other states, would vanish.

The corporate income tax? Down from 8.93 percent to 7.5 percent.

And here's the real whopper: Maine's top personal income-tax rate would plummet from 7.95 percent all the way to a flat 4 percent.

You read that right. This plan cuts a year-round Mainer's state income tax by virtually half -- a home-grown economic stimulus package if ever there was one.

(Continued on page 2)

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