The trouble with tax reform is that almost everybody not named Warren Buffett believes it should result in their personal tax bill going down. Buffett, the billionaire CEO of Berkshire Hathaway, is one of the few human beings who seems to grasp the concept that any rational plan for tax reform is going to result in somebody paying more, billionaire CEOs being the most likely targets.

The other reasonable target is you.

Also, me.

Tax reform is supposed to make the system fairer. According to most people’s definition of fairness, that means they should pay less, and somebody else – billionaires and welfare cheats, mostly – should make up the difference. Trouble is, there aren’t many billionaires, so no matter how much tax reform soaks them, it won’t cover tax reductions for everybody like you. Welfare cheats make up a much smaller percentage of the population than is generally supposed. Since their assets are considerably less than the billionaires, it’s unlikely they can scrape up the difference.

Which brings us to reality. In Maine, a group of legislators – Republicans, Democrats and an independent that go by the unfortunate nickname of the “Gang of 11” – have proposed a tax reform plan that, by any honest assessment, means you’ll pay more. Me, too. Even so, it may not be such a lousy idea.

Let’s list the good parts first. The state income tax would be cut nearly in half. The top rate, which most of us pay on most of our income, would go from almost 8 percent to 4 percent. In fact, all the rates would go to 4 percent. No question that all of us, including Warren Buffett types, would pay less. And paying would be easier, since most deductions and other tax dodges would be eliminated. Although, that means most of us would pay more. But probably not as much more as we do now.

The estate tax would vanish. If you have an estate worth more than $2 million, this is a big deal for you. Or, actually, more of a big deal for your relatives, since you’ll be dead before it does anyone any good.

Property taxes would go down. The current homestead exemption of $10,000 on your primary residence would be increased to $50,000. Sweet.

Corporate taxes would be reduced. A little. But, still serious money if you happen to be a billionaire.

Poor people would get a tax credit worth as much as $1,000 a year. Pocket change for Buffett, but serious dough for those considering welfare fraud to make ends meet.

And those folks will need every penny, because here comes the bad stuff.

The sales tax would increase from 5 percent to 6 percent. It would also be expanded to cover everything except health care and education. That means basic grocery items will be taxed for the first time, as will such other essentials as electricity, heating fuel and all services, from haircuts to home repairs to legal advice. The tax would also hit all those recreational activities so beloved by tourists, from whale-watching cruises to ski tickets to water slides. Of course, you’ll be paying, too, because that includes tickets to movies, concerts and lectures by Warren Buffett.

Taxes on restaurant meals, lodging and beer would be raised. So would excise taxes and real estate transfer taxes.

And yes, Zumba classes would be taxed.

Also, newspapers.

I figure I’ll use up all my tax savings and more on just the increased cost of beer. The only way to make my personal budget balance will be to give up water slides and Warren Buffett lectures and take up welfare fraud.

Still, the Gang of 11’s plan is a sensible approach. While we can quibble about the details (I don’t think beer should be taxed at all), the essential points address some serious issues. Which are:

The current sales tax is too narrow. It relies heavily on people buying cars and home-improvement stuff. It allows tourists to enjoy Maine without contributing much to state coffers.

The current income tax is too high. Even with the tax cut passed last legislative session, it’s a drag on the economy. This plan shifts from taxing income to taxing consumption (you’ve got tuberculosis, so your disease tax will be $45), which makes sense to every economist with an IQ higher than my dog. (Uh oh, pet grooming is on the list of newly taxable items.)

The state budget isn’t going to get balanced unless many of these ideas are incorporated in a compromise deal that can cover the $880 million shortfall and avoid cutting $200 million in revenue sharing to municipalities.

The Gang of 11 claims tourists and rich people will pick up most of the tab for the additional $700 million in revenue this plan will produce. That’s nonsense. You and I are going to pay more. Probably not a lot more. But more.

Because that’s what tax reform is really about. It’s 10 percent fairness and 90 percent generating cash. Too bad the G-11 refuses to admit that, avoiding this inconvenient truth like there was a tax on it.

The plan includes a sales tax on email service, but if you can afford it, send me comments at aldiamon@herniahill.net.

Copy the Story Link