Analysts with the Maine Center for Economic Policy (MECEP) have drafted an aspirational budget intended to demonstrate to the new Democratic-controlled state legislature and Governor Janet Mills how they might best leverage state resources to address widening wealth inequality and build “an economy that works for everyone.” 

MECEP’s Prosperity Budget, released Tuesday, advises lawmakers to counter former Governor Paul LePage’s “lopsided tax cuts that made it harder for our state to invest in people and communities” by moving towards a progressive tax policy which fully funds schools, grows quality jobs with quality benefits including earned paid sick days, expands access to health care, modernizes infrastructure and creates valuable public service 

“What we saw in November is that voters elected candidates who ran on things like fully funding education, expanding health care, providing job trainings, building out our infrastructure,” said MECEP’s Mario Moretto, a co-author of the model budget. “Those are things that MECEP has always advocated for because we know that they reduce barriers to prosperity.” 

To address the expressed needs of the voters, though, the Prosperity Budget’s drafters acknowledge that lawmakers will be starting from a deficit this legislative session. In passing the next two-year budget, legislators will inherit a $504-million structural gap between what the state is projected to bring in through tax revenue and what the state is obligated to fund for education, infrastructure and health care.   

The revenue shortfall is the result of LePage’s tax cuts tilted towards Maine’s wealthy, which has redistributed half of the state’s lost revenue to the top 20 percent of taxpayers, a recent MECEP report shows. 

Maine’s wealthiest one percent pay an 8.6-percent effective tax rate — a lower rate than all other Maine taxpayers, according to a MECEP analysis of available tax data. The current tax code exacerbates the effects of the state’s widening income inequality, the authors of the Prosperity Budget explain. Since 1973, the wealthiest one percent of Mainers have reaped 42 percent of the state’s income growth. That is eight times the amount captured by Maine’s richest one percent from 1945 to 1973. 

According to MECEP, there is an appetite among Mainers to rectify this widening inequality through a progressive tax code. 

“Two years ago in Maine voters approved a 3-percent surcharge on income over $200,000 to fund schools. What our public opinion research shows is that more Mainers support the surcharge now than did in 2016,” Moretto said. 

A MECEP poll conducted in November 2018 found that 63 percent of Mainers believe the wealthy and large corporations pay less than their fair share of taxes. 

“I hear from constituents all the time who are upset about the LePage tax shifts that increased property taxes and cut school funding in order to give the wealthy more income tax breaks,” said state Rep. Ryan Tipping (D-Orono), House chair of the legislature’s Committee On Taxation. “I think it is reasonable to confront the fact that those in the top income brackets pay less per dollar of income in total state and local taxes than someone who has a middle- or working-class job.” 

MECEP analysts are proposing that the incoming class of legislators and the new governor act upon the desire for tax fairness and secure additional revenue to not only pass a budget which fully funds the state’s existing commitments to Medicaid expansion, K-12 education, and revenue sharing with municipalities (together, $664 million over two years), but also prioritize public investment into neglected sectors which also ameliorate the effects of growing inequality — totaling an appropriation of $781.7 million over two years. 

Those proposed areas for public investment include: 

Education 

Fully and equitably funding public education is a necessity to addressing growing income equality, MECEP analysts argue. 

In underserved schools in communities with high poverty rates, this underfunding can produce pronounced outcomes in test scores, graduation rates, and later earnings in the labor market. The analysts point to fact that among states in the Northeast, Maine has the second-lowest income mobility. “Mainers born between 1980 and 1982 into the poorest households have just an eight percent chance of making it into the wealthiest 25 percent of households,” the model budget reads. 

On top of the state funding 55 percent of the cost of essential programs and services at K-12 schools, at the biennial cost of $102 million, MECEP’s Prosperity Budget proposes new investments in early education and childcare as well as three times as much funding for the State of Maine Grant, which is the state’s primary needs-based form of non-debt financial aid. 

Job creation

Building an inclusive economy, where all workers share the prosperity created through economic growth, can be achieved by policymakers through investment in the human capital of Maine’s workforce, MECEP analysts argue. This means investing in training Maine’s workforce as well as promoting policies which improve job quality and restore the economic power of the workforce. 

At the cost of $31 million biennial, they propose doubling the amount at which the state funds adult education, from $4 million to $8 million, to cover English proficiency and high school equivalency, skill-building and college preparation; passing a statewide paid sick day policy; and reinvesting in the Department of Labor’s Wage and Hour Division and the Maine Human Rights Commission. 

Racial justice 

Historically, policies in Maine to address inequality in education and access to quality jobs have excluded Black Mainers, Latinos and Maine’s Indigenous population. According to the model budget, the state’s unemployment rate for Indigenous and Black populations is currently double the state average. 

At the cost of $600,000 biennial, the budget proposes the legislature create a “Permanent Commission on the Status of Racial and Ethnic Populations in Maine,” modeled on the Permanent Commission on the Status of Women established in 1964, to “actively work to identify and institutionalize mechanisms that ensure these populations are included in every aspect of our state’s economic and community development.” 

Health care 

More than any other state in New England, Mainers are more likely to lack health insurance, MECEP analysts have found. In fact, across all categories, including children, Maine lags behind it neighbors in insurance coverage rates. To address, the budget proposes fully funding Medicaid expansion through 2021 at the cost of $110.5 million and expanding coverage to eligible immigrants; funding child and adult dental programs; restoring family planning programs cut under LePage; and appropriating funds so Maine seniors and disabled people can live in their homes. 

Additionally, MECEP allotts $22 million for two years to fund the 2013 recommendations of the Maine’s Office of Substance Use and Mental Health to address substance use disorder in Maine. These include decriminalizing opioid use though programs like Law Enforcement Assisted Diversion and funding medication-assisted treatments, clean needle exchanges and naloxone distribution. 

Infrastructure and public services 

On top of the state sharing five percent of its revenue with municipalities to offset their local infrastructure maintenance costs — the absence of which has contributed to rising property taxes which are disproportionately absorbed by low- and middle-income households — the Prosperity Budget calls for new investment in physical infrastructure and reversing the staffing cutbacks and outsourcing in state government agencies. This can negatively impact Mainers experiences with public services, the budget’s authors contend, pointing to staff shortages at Riverview Psychiatric Center and LePage’s cuts to the Maine’s public health nursing workforce. 

At the cost of $23 million biennial, the budget proposes the legislature expand broadband, index the state’s gas tax to inflation, and conduct a study to examine the impact of previous budget cuts and make recommendations to guarantee that high-quality service public service are provided. 

Making Maine’s tax code more progressive 

At the total cost of $781.7 million over two years, the Prosperity Budget would necessitate that lawmakers increase revenue by changing the tax code. 

MECEP analysts have concluded that if LePage’s tax cuts tilted toward the wealthy were completely reversed, lawmakers would have $860 million to work with in the next two-year budget cycle. 

To create a budget which builds “an economy that works” for all Mainers, the Prosperity Budgets calls for creating a more progressive tax code, restoring Maine’s estate tax to its 2011 level, closing tax havens for the wealthiest Mainers and profitable businesses, and exporting some of the state’s tax burden through consumption taxes focused towards the tourism industry. 

To correct the fact that Maine’s wealthiest one percent — families with annual income above $434,500 — pay the lowest effective state and local tax rate of all income groups, the Prosperity Budget is proposing two new tax brackets on highest incomes. Specifically, MECEP analysts propose that families with income between $200,000 and $500,000 a year pay a 9.5-percent effective tax rate, while families with income greater than $500,000 pay a 10.5-percent rate. 

To decrease the effective tax rate of Maine’s lowest-income households and put more money back into their pockets, the analysts recommend expanding the tax rebate those households receive by tripling funding for the state’s Earned Income Tax Credit. This would bring Maine’s EITC credit more inline with other states which also offer the credit, and bring it within 15 percent on the federal EITC credit. 

“If we want meaningful action to invest in our state’s future, we must put everything on the table,” Rep. Tipping said. “We cannot afford to leave people without healthcare just so the wealthy can enjoy preferential tax treatment. We must not fail our students and put our state’s future prosperity in jeopardy just to protect some out-of-state company’s bottom line.” 

The preceding originally appeared on mainebeacon.com, a website and podcast created by progressive group the Maine People’s Alliance.