Ethan: The governor must have felt very lonely during his State of the State on Tuesday. Republicans simply sat on their hands, especially when he talked about his tax reform proposal.

Phil: Likewise, if John Baldacci had called for broadening and raising the sales tax in order to export our burden to tourists and reduce taxes on Maine residents, Democrats would have been cheering. On Tuesday? Not so much.

Ethan: LePage embraces a Democratic idea to broaden/raise the sales tax in order to reduce taxes elsewhere and adds in a big slice of Republican ideology by reducing the overall size of state government and ends up getting crickets.

Phil: As Three Dog Night sang, “One is the loneliest number.”

Ethan: From the looks of Tuesday, if he doesn’t compromise, his budget is in trouble. Right now, it is clearly not coming out of committee close to the way it went in.

Phil: It never does. What remains to be seen is how much the Legislature changes it and how LePage reacts.

Ethan: In the past, when the Legislature changed his budget, he either signed it under protest, vetoed it or refused to participate in fixing any future issues. The question is whether this time he will accept other ideas.

Phil: How about we try to come up with a compromise? The first thing I would like to see is that the sales tax increase be eliminated. I can live with the broadening, but it is already hard enough for our border towns to compete with New Hampshire.

Ethan: OK, but you’ll need to leave it at 5.5 percent, as opposed to reverting all the way back to 5 percent, otherwise you won’t have enough revenue to accomplish as much as we hope.

Phil: Your appetite for new revenue knows no bounds, but OK.

Ethan: Now, what we do with all the new sales tax revenue is key to making our compromise work. In order to most help our economy, you simply cannot put all this new revenue toward income and estate tax relief, as that will primarily go to the wealthy few, and we know trickle-down economics doesn’t work. Better to put that extra revenue toward property tax relief. Then you put money in the pockets of middle-income families, where our economy needs it most.

Phil: Property tax relief? Been there. Done that. Municipal government has an insatiable appetite to expand, and history shows that local elected officials won’t lower taxes in this system. Their behavior and our income tax rates have pushed people out of Maine and inhibited others from arriving.

Ethan: Not really. The effective income tax rate in Maine is only a few percent. Any CEOs and former Mainers who are moving based on money understand clearly how the tax code works. But hey, I am willing to bring the income rate down in the spirit of compromise. I am simply looking to reduce it less in order to make sure middle-income families see more.

Phil: OK, in exchange for a smaller reduction in the income tax rate, I would like to see property tax relief sent to the taxpayer rather than the town manager. Right now, you send it to the town and the shell game begins. They convince voters they are getting relief, when all you are really getting is a smaller increase.

Ethan: An increased refundable circuit breaker and a homestead exemption paid directly to the Maine resident will do just that. I’m in.

Phil: I don’t know why you think people should have to fill out a form and send it to a bureaucrat to determine if you’re worthy of tax relief, but OK. Then I need a larger overall reduction in state government spending over time. For me, this is the crux of the issue – $267 million is great, but it should be double.

Ethan: You know as well as I do that you can’t slash $500 million from the state budget. Even stingy LePage has grown state government by a quarter billion in four years, so no dice.

Phil: Baldacci cut education funding, then used the one-time “stimulus” to make up the difference. LePage simply restored state dollars for local education.

Ethan: I love it when you “personal responsibility” Republicans blame others for your spending.

Phil: But if you won’t agree to cutting $500 million, how about we agree to control the growth of state government? Other than education, eliminate areas where the state pays municipalities to run local government. Force them to pay for it locally.

Ethan: If we go there, then municipalities would need more ways to raise revenue. Right now, the only tool they get is the property tax and small fees. Give them the full rights of sales and income taxation and then we will be able to build independence.

Phil: Do you ever consider spending less? Enough. Municipalities can still function with a limited budgets by motivating them to collaborate with county government to remove redundant services, thus saving money without losing quality.

Ethan: Sure, but that is up to them and the people who elect them. Cutting revenue sharing and general assistance is a deal breaker for me if you don’t allow municipalities to find the revenue elsewhere.

Phil: If you require a public two-thirds vote on implementing these new taxes and send a quarter of it to county government to support the surrounding towns, then maybe I could support.

Ethan: I can live with that.

Phil: OK, so what does our package look like? A smaller sales tax increase, less of an income tax reduction and more property tax relief that goes directly to the resident.

Ethan: Yes, this should make our tax code more fair and inject money into the pockets of the middle class.

Phil: On the flip side, we get more restrictions on government growth and additional cuts to state spending on municipal services, while allowing local communities to tax in new ways, as long as that increase is put out to voters and earns a two-thirds vote.

Ethan: Not bad. Do you think LePage will sign it?

Phil: I’ll give him a call.