Tax reform in Maine is absolutely necessary, for big-picture reasons. And because it’s necessary, we urge Mainers to preserve tax reform by voting “no” on Question 1 Tuesday.

The recession exposed, again, the structural flaws in how Maine raises money. The sales tax base is too narrow and too heavily weighted toward the building and automotive sectors; if they do well, the state does well. When they tank, the state tanks.

The same is true with income tax. Bullish economies fill state coffers with income and capital gains taxes. From 1996 to 2000, for example, the glistening dot-com bubble saw revenue from these areas spike 11 percent in Maine. When that bubble burst, according to state data, this increase all but disappeared in 2001. This is a boom-and-bust in which Maine is well-versed — it happened in 2008, too — but not yet insulated against.

Failing to enact reform now means leaving the state vulnerable to the next recession. It would also mean Maine will have learned nothing from the financial pain of the last two years. An imperfect policy — which this reform is, for excluding golf and skiing and still not cutting the income tax rate enough — trumps an unstable status quo that’s harmful to Maine’s economy and governance.

We agree with reform opponents that a “real” tax cut is needed. Yet Question 1 is not about cutting taxes. The tax reform law passed last year by the Legislature and being challenged in this election was neither sold as, nor intended to be, a tax cut. It is a fundamental reworking of how taxes are raised, in recognition of the state’s weaknesses and the evolution of its economy and society. And given Maine’s current economic and political climate, a “real” tax cut is fantasy. The looming deficit won’t allow it. Even in 2006, when tax reform was broached and the economy hadn’t yet derailed, it was unachievable. Four tax-cutting referendums later, it has still not been done.

Tax reform won’t do it either, but this is no reason to reject it. What reform actually does — despite the cavalcade of confusing advertisements and double-talk by its opponents — is simple. It cuts Maine’s hellish top income tax rate of 8.5 percent to 6.5 percent. To offset the income tax reduction, it expands the sales tax onto new goods and services and raises the meals and lodging tax. That’s it.

Yes, there are complex details, the tax credits in particular. But this policy has been buffed and waxed by wonks and lawmakers for the better part of four years. It’s the product of compromise, negotiation and political arm-twisting, which doesn’t make it devious; it makes it legislation.

Tax policy is a terrible topic for referendum. Its complexity has allowed message-makers to spin the public dizzy, with doomsaying advertisements and half-truths. While popular votes are warranted in some cases, do we really need one for tax code changes?

It’s not naivete to endorse these reforms and trust its architects in state government to make it work. If it doesn’t, after all, the worst outcome is more reforms. Governing by referendum is not efficient — just ask California — and policies must be given the chance to work or fail.

Tax reform deserves that chance.


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