Last week four members of the Portland Regional Chamber of Commerce urged voters to approve the so-called “tax reform” law. Not one of them has a tax background and like the vast majority of the supporters of this tax law, their column illustrates that they did not properly research the facts to understand the law. Unlike them, I am a retired corporate tax director and CPA, who spent over 300 hours preparing a detailed analysis of this very complicated and deceptive law.

Before one reviews this new law and the need for reform, one needs to understand where Maine ranks among other states in its sales, income and property taxes. The 2007 Census report ranked Maine’s total state tax collections as seventh highest in the country. Maine ‘s income tax was ranked 17th highest, its sales tax was ranked 21st highest and property tax was sixth highest. The fact is all three of Maine ‘s taxes are above average and reform should have been more aimed at reducing property taxes, not a shift from income taxes to sales taxes.

As a life-long Democrat, I was amazed that the Democratic controlled Legislature passed LD 353 in late May of 2009, which cut the property tax circuit breaker program by 20 percent, the homestead exemption by 23 percent and increased income taxes on low and middle income taxpayers by about $10 million by reversing for year 2010, a portion of the inflation adjustment known as indexing.

Indexing is the most important part of Maine ‘s income tax law that keeps the system progressive. A few days later, the Legislature passed LD 1495, which they claimed was a tax cut mostly directed to low and middle income taxpayers and would make the law more progressive. The truth is when one combines both laws, the net tax cut is only $13 million. The breakdown of the tax cut, however, shows that a group of less than 4,600 taxpayers with income over $317,000 will get a net tax cut of $27.6 million, while the other 99.3 percent of Mainers will have a net tax increase of $14 million.

If you just look at LD 1495 alone, the numbers are not much better. In year 2011, the Maine Revenue Services estimates that taxpayers with income below $30,330 will average a net tax cut of $35 each. Taxpayers with income from $30,330-$317,458 will have a net tax cut of $40. Taxpayers with income over $317,458 (top 1 percent) will get a $3,162 tax cut. The top 1 percent receive a percentage tax cut about seven times the percentage for the other 99 percent of Mainers. Clearly the law is weighted in favor of the very rich. By 2013, because the new law eliminated the inflation adjustment (indexing) until 2014, the MRS estimates that a group of less than 4,800 taxpayers with income over $340,000 will have a tax cut of $34.3 million; the other 99.3 percent of Mainers will have a net tax increase of $8 million. Granted in the other 99.3 percent there are taxpayers with small tax cuts, but those cuts are $8 million less than the tax increases on other taxpayers.

One of the many unsubstantiated claims by supporters of LD 1495 is that Maine ‘s sales tax collections are low as compared to other states and that the tax base is too narrow and claimed the expansion of the sales tax to new services will reduce the volatility. The truth as noted above is that Maine ‘s sales tax was 21st highest and Maine ‘s sales tax base is not narrow as most states do not tax many services. The $44 million total sales taxes estimated by MRS to be collected on the new services represents only about 1 percent of total state and local tax collections of about $5 billion. The $44 million is less than 1 percent of total tax collections and will have no real impact on revenue volatility.

The new law will hurt thousands of small businesses that will now have the added expense to collect sales taxes for the first time. Also their prices will increase by 5 percent and this will impact their sales. A 2006 study by a national consulting firm estimated that the total cost to collect sales tax was 13.5 percent of the sales tax collected for businesses with under $1 million in sales.

The claim that the new law will encourage business expansion in Maine because of the tax cut is not supported by the facts. The MRS estimates that all income tax groups from $58,750-$340,858 will on average have a net tax increase. Less than 1 percent of Maine ‘s businesses have income over $340,858.

The vast majority of this poorly designed tax law was shaped by politics not sound tax policy. The law creates thousands of tax losers including about 113,000 low income taxpayers, the elderly and thousands of taxpayers with large itemized deductions for medical expenses, charitable contributions, mortgage interest and property taxes.

Please join me in voting Yes on 1 to stop the worst tax law passed in Maine in 40 years. For more information, go to www.mainedemocratstaxreform.org.

Albert A. DiMillo Jr. lives in South Portland.